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Rationing is the controlled distribution of scarce resources, goods, services, [1] or an artificial restriction of demand. Rationing controls the size of the ration, which is one's allowed portion of the resources being distributed on a particular day or at a particular time. There are many forms of rationing, although rationing by price is ...
A classic example of how price controls cause shortages was during the Arab oil embargo between October 19, 1973, and March 17, 1974. Long lines of cars and trucks quickly appeared at retail gas stations in the U.S. and some stations closed because of a shortage of fuel at the low price set by the U.S. Cost of Living Council .
Another reason for capital market imperfections associated with limited commitment is the ability of the borrower to renegotiate the terms of the contract ex post. Even though the contract is signed as a secured loan , because of the enforcement costs, the lender never gets the full payment in case of default.
Rationing controls the size of the ration, which is one person's allotted portion of the resources being distributed on a particular day or at a particular time. Rationing in the United States was introduced in stages during World War II, with the last of the restrictions ending in June 1947. [1]
Credit rationing by definition is limiting the lenders of the supply of additional credit to borrowers who demand funds at a set quoted rate by the financial institution. [1] It is an example of market failure, as the price mechanism fails to bring about equilibrium in the market.
Capital market shares some of the "imperfections" of the labor market discussed above: long term relationships between banks and borrowers act like the long term employment relationship between an employer and their workers. Like layoffs in the labor market, there is credit rationing in the financial market. Also, a typical loan contract is ...
However, in practical terms a company's capital constraints limit investments to projects with the highest NPV whose cost cash flows, or initial cash investment, do not exceed the company's capital. NPV is a central tool in discounted cash flow (DCF) analysis and is a standard method for using the time value of money to appraise long-term projects.
A blue chip is capital stock of a stock corporation (contrasted with non-stock one) with a national reputation for quality, reliability, and the ability to operate profitably in both good and bad times. [1] [2]