Finance and Par Value - 2445 Words

Chapter 14 1. Templeton Extended Care Facilities, Inc. is considering the acquisition of a chain of cemeteries for $410 million. Since the primary asset of this business is real estate, Templeton’s management has determined that they will be able to borrow the majority of the money needed to buy the business. The current owners have no debt financing but Templeton plans to borrow $320 million and invest only $90 million in equity in the acquisition. What weights should Templeton use in computing the WACC for this acquisition? 2. In August of 2009 the capital structure of the Emerson Electric Corporation (EMR) (measure in book and market values) appeared as follows: Thousands of dollars Book Values Market values Short- term debt†¦show more content†¦The dividends are expected to grow at a rate of 5.8% per year into the foreseeable future. The price of this stock is now $25.18. c. A bond that has a $1,000 par value and a coupon interest rate of 12.7%. A new issue would sell for $1,150 per bond and mature in 20 years. The firm’s tax rate is 34%. d. A preferred stock paying a 7.2% dividend on a $93 par value. If a new issue is offered, the shares would sell for $85.32 per share. 7. Salte Corporation is issuing new common stock at a market price of $27.24. Dividends last year were $1.47 and are expected to grow at an annual rate of 5.7% forever. What is Salte’s cost of common equity? 8. Falon Corporation is issuing new common stock at a market price of $27.04. Dividends last year were $1.34 and are expected to grow at an annual rate of 7.3% forever. What is Falon’s cost of common equity capital? 9. Temple-Midland, Inc. is issuing a $1,000 par value bond that pays 7. 8% annual interest and matures in 15 years. Investors are willing to pay $953 for the bond and Temple faces a tax rate of 34%. What is Temple’s after-tax cost of debt on the bond? 10. Belton Distribution Company is issuing a $1,000 par value bond that pays 7.4% annual interest and matures in 15 years. Investors are willing to pay $958 for the bond. The company is in the 18 percent marginal tax bracket. What is the firm’s after-tax cost of debt on the bond? 11. The preferred stock of Walter Industries Inc.Show MoreRelatedInvestigating The Suitability Of Different Sources Of Finance931 Words   |  4 Pagesdifferent sources of finance to facilitate Par Foods Ltd.’s short term objectives. 3.1 Sources of finance There are two main sources of finance that Pars food LTD could consider as options to keep the company viable and moving forward. These are internal and external sources. Internal sources include selling assets, wages and retained profit. The external sources can be long and short term. Long term sources are owner investments and debentures. Whereas short term sources of finance can be things suchRead MoreFinancial: Bond and Money Market845 Words   |  4 Pagescost. 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Is a frozen foods business and is one of the market leaders in the UK. It mainly deals in potato based products and is only operating in the UK with all of its production likeRead MoreDefining Financial Terms and Role in Finance Essay1197 Words   |  5 PagesRunning Head: DEFINING FINANCIAL TERMS AND ROLE IN FINANCE Defining Financial Terms and Role in Finance University of Phoenix FIN 370/ Finance for Business November 10, 2010 Defining Financial Terms and Role in Finance The following paragraphs contain financial terms and their role in finance. The terms are finance, efficient market, primary market, secondary market, risk, security, stock, bond, capital, debt, yield, rate of return, return on investment, and cash flow. The fourteen termsRead MoreEffectiveness And Effectiveness Of Management Operations1619 Words   |  7 Pagespatient data should be given to the providers so as to enable improved service. †¢ A decrease in medical expenses. 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The first would be a capital lease which is a lease in which the lessor only finances the leased asset, and all other rights of the ownership transfer to the lessee (Accounting Tools). Within the parameters of the capital lease the lessor can only record the interest on the lease as an expense, while the asset itself becomes a fixedRead MoreCost Financing And Equity Financing1559 Words   |  7 Pages10/yr. maturity and 8% annual interest rate at its par value, you are expecting to get 8%/yr. on the $1000 bond issue (loan to the company) with a return of principal (in this case $1000) at the end of the 10th year. 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Toddlers and Tiaras free essay sample

Since it’s debut on TLC in 2009, Toddlers Tiaras has captured the attention of audiences of all ages across the country. This reality series gives viewers an inside look at the extremely competitive world of child beauty pageants by following contestants and their families as they prepare for various shows. With the youngest competitors starting at two years old, it is evident that most contestants did not choose this life for themselves. As a result, the show becomes just as much about the parents as it is about the children.As the saying goes, a little competition never hurt anyone, but after watching the extensive, exhausting process each girl goes through before each pageant, a big question arises as to why any parent would ever chose this life for their child? With competition this big and contestants this young, someone is definitely getting hurt. Early childhood is a critical period in one’s life as it marks the beginning of the life long process of socialization. Socialization is defined as â€Å"a continuing process whereby an individual acquires a personal identity  and learns the norms, values, behavior, and social  skills appropriate to his or her social  position. † Primary socialization usually extends until a child enters kindergarden and is a vital period in a young person’s life as it sets the foundation for all future socialization. During this stage, young mind’s are extremely impressionable as they are relying solely on their observations and experiences to decipher their role in society.Since most contestants begin their involvement in beauty pageants before their school years, it is imperative to recognize the role of child beauty pageants as social institutions for they become responsible for the socialization of young contestants. The main responsibility of the socialization process is the formation of a personal identity. Your identity is strongly shaped by the values you uphold as they help guide y ou in making decisions and forming opinions. The first thing that beauty pageants do is strip children of what they should value most; their innocence.It begins with their hair as it is yanked, teased, curled, and straightened over and over again, only to be covered by gigantic hair pieces that are double the size of their head. Following the hair, comes layers and layers of heavy makeup accompanied by fake eyelashes and a mouth piece, called a flipper, which is used to cover baby teeth. In addition to their teeth, the contestants’ nails are made longer with acrylics and their skin is made darker with artificial tanner. The transformation that takes place has contestants looking like life size barbie dolls from the neck up.The only way to correct the discrepancy that occurs from the neck down is by dressing the girls in provocative outfits that reveal their midriff and accentuate their legs. The final product is completely unnatural looking and sends the message that this is what a girl is expected to look like which is totally unrealistic. When these contestants see that every other girl looks the same way they do, they will begin to think their attire is normal and acceptable. With so much emphasis on how they look, contestants begin to form a superficial perspective of themselves and of others because they now think that their self worth is only skin deep.The judging process only heightens this superficial outlook as it encourages materialism and vanity. One pageant director states â€Å"my judges are looking for facial beauty† which is further backed up by a judge who says, â€Å"I look for the full package in a girl: your hair, your makeup, making sure the makeup coordinates with the girls features. † The judges have a very shallow view on what it means to be a full package that sends the message to contestants that what is on the inside doesn’t count.The contestant’s performances on stage during the talent round robs them of any innocence they may have left as they dance to flirtatiou s choreography that is completely inappropriate for their age. Their behavior on stage offers them as merely sexual objects and whether they know it or not, sends the message that they are sexually available. With Beauty Pageants being the perfect pedophile’s playground, that is not the message that young girls should be sending to a crowd of strangers for it could easily entice unwanted attention.It becomes evident that many performances are excessively sexualized to a point where it makes people uncomfortable, as even one of the pageant judges stated, â€Å"Sometimes, the routine they do, I feel can be a little much. † One would think that the contestant’s parents would regulate the content of their child’s routine but shockingly, they are completely oblivious to the problem. Many of the parents continuously refer to their child’s booty shaking and gyrating as hip hop and don’t think anything of it.One pageant moms asserted â€Å" I think we’re dressing them up to look a lot older than they are and sexualizing them and I don’t agree with it† however, while she says this, her daughter is dipping it low and swinging her hips around in the background. Instead of being concerned about the safety of their child, it seems that all of the pageant parent’s energy is directed toward winning. Many times, the parents get so caught up in the competition that they are unable to see the negative effect they are having on their child. This can be seen in the Season 3 episode â€Å"Le Masion de Paris,† through four year old contestant Makenzie and her mother, Juana. Juana says that her daughter likes to help with the process of getting ready however, Makenzie is resistant and uninterested. It becomes clear that there is a lack of discipline as Makenzie is constantly whining and screaming and even tells the camera that she can do whatever she wants. In response, Juana agrees that Makenzie â€Å"likes to do what Makenzie likes to do at Makenzie’s time† and says that she just lets her do it.This lack of discipline will end up hurting Makenzie as she grows older for she will never learn how to cope when she doesnt get her way. On pageant day, everyone struggles to get Makenzie ready for the pageant as she doesn’t want to follow directions . One of the stylists complains, â€Å"putting nails on Makenzie was like putting nails on a Tasmanian devil† and another agrees saying â€Å"I rea lly had to chase her around, she wouldn’t cooperate. † While getting Makenzie ready for the pageant, adults are constantly having to push her down onto the styling chair and she repeatedly screams â€Å"Leave me alone, people! on the top of her lungs. Juana does nothing to control her child’s outbursts which makes Makenzie think that her behavior is acceptable and therefore, she continues acting out. After much crying and countless temper tantrums, Makenzie finally makes it to the stage where she â€Å"turns it on. † This shows how fake the competition for as soon as a contestant steps on stage she turns off her real emotions and puts on an act. Juana exclaims that Makenzie â€Å"absolutely loves being on stage,† however, the whole time she is off stage she is described as a â€Å"holy terror. It seems that the only time Makenzie is actually happy is when she is on stage, which is only for a few minutes out of a very long day but that short lived happiness is apparently enough for Juana to forget about t he terror Makenzie put everyone through all day. Before the awards, Juana says, â€Å"If Makenzie does not win the pageant, I will be let down because we do put a lot of time and money and effort into it. † It doesn’t make sense that Juana would continue entering Makenzie in competitions when it seems like she would be a lot happier if she didn’t have to do them and it would save their family a lot of money and time.In the end, it seems like it just isn’t worth it but Juana obviously isn’t thinking logically. It becomes evident that many parents have a personal motive in forcing their child into pageants for they seem to experience the most satisfaction and the most disappointment out of their child’s experience. In the Season 3 episode â€Å"Le Masion de Paris,† Tammy, the mother of 9 year old contestant Alex, excessively frets over her child’s hair, putting unneeded stress on her child. She tells Alex that her hair is a mess when in reality, it is perfectly straight.During the awards, Alex ends up winning â€Å"Best Hair† but still, Tammy is disappointed and states â€Å"I don’t think her hair style flattered he r. † Because of Tammy’s disappointment, Alex doesn’t feel proud of herself and isn’t able to enjoy her win. Tammy’s attitude sets a poor example for her child and promotes perfectionism and self criticism in Alex. As if these contestants don’t already look ridiculous enough in their hair and makeup, there is no need to be nit picky about hair that is fully styled.The last thing that these contestants need is to feel ugly in their pageant attire for if they don’t feel good about themselves with that much makeup on, how will they feel once all the makeup comes off? Additionally, when these girls are all being pinned up against each other to determine who is the most beautiful, they are going to develop self esteem issues if they are comparing themselves to every other girl. In the end, beauty pageants should not be open to young children before they begin schooling because they give contestants a skewed perception of reality that should not be the foundation of one’s identity.Child beauty pageants should have an age limit so that children have a chance to form th eir identity before getting involved in pageantry. Being a contestant in a beauty pageant should be a character that one takes on for a short period of time, not a lifestyle. The television show Toddlers ; Tiaras only makes matters worse because any young person who watches the show will receive the same corrupt messages as the contestants. If these pageants are being aired publicly it sends the message that this behavior and these standards are appropriate. This is not the show that children should be growing up to.

Hesters Story Essays - English-language Films, The Scarlet Letter

Hester's Story Hester's Story Regarding The Scarlet Letter, the subject of of the main character has been widely debated by all. Some say that it is Hester's story, while others insist that it is Dimmesdale's story. Personally, it's quite obvious to me that the novel is centered around Hester, for she's the character that develops and grows the most. Throughout the story, Hester matured, became more independent and earned the respect of the townspeople. When Hester was first released from prison, she was openly defiant towards the townspeople. To rebel against her punishment, she elaborately embroidered the scarlet A into a beautiful work of art. Her pride demanded that she held her head high and not conform to the Puritan ways. ?Those who had before know her?in which she was enveloped.? (56). As the story progressed, Hester put aside her pride and placed her priority in Pearl, her daughter. She learned to be more self-reliant and when forced to take up embroidery to support her child. In addition, she worked hard to remain chaste and help the unfortunate to build a role for Pearl as the daughter of a respected woman, instead of as an illegitimate bastard of a condemned criminal. Hester's dilligence and kindness won over the respect and admiration of the townspeople, who had earlier ostracized her. She provided help and comfort for all that needed them. Soon, even the interpretation of her punishment changed. People began to say that the scarlet A meant Able, for it reprented Hester's helpfulness. Do you see that woman with the embroidered badge?' they would say to strangers. ?It is our Hester-the town's own Hester, who is so kind to the poor, so helpful to the sick, so comfortable to the afflicted.'? From the very beginning, Hester took responsibility for her actions. She never revealed the name of her ex-lover, Dimmesdale, because she believed that it was her duty to face the consequences. In order to secure a promising future for her daughter, Hester tossed aside her pride to transform into a model citizen. By making the best out of her circumstances, she earned the admiration of her peers, who were impressed by her courage and determination. After leaving New England to arrange a marriage for Pearl, Hester returned by her own free will to live out the terms of her punishment. ?But, in the lapse of the toilsome, thoughtful, and self-devoted years that made up Hester's life, the scarlet letter ceased to be a stigma which attracted the world's scorn and bitterness, and became a type of something to be sorrowed over, and looked upon with awe, yet with reverance too.? (273). Through it all, she matured and grew not only as a woman, but also as a survivor. English Essays

Waves in physics Essay Example

Waves in physics Essay Example Waves in physics Essay Waves in physics Essay Application of different type of waves in medicine Assessment type(s): MAP Criteria: A: One world, B: Communication in science Word count: 1000+ Explain the use of different waves in medicine. Your essay should: -explains how different type of waves are used to diagnose / cure different diseases. -discusses the effectiveness of science and its application in solving the problem or issue. -discusses and evaluates the implications of the use and application of science interacting with at least two of the following factors: moral, ethical, social, economic, political, cultural and environmental. You should also: -use sufficient scientific language correctly. -communicate scientific information effectively. -fully documents sources of information correctly, appropriate to the task The application of waves in medicine: Shock wave: Shock wave is one of the wave which is used in medicines. This wave was introduced 20 years ago. This application changed the treatment of Urologists. The formation of stony concretions in the bladder or urinary tract. Shock waves can treat kidney and urethral stones. Shock waves have also been used to treat fractures. The concept of orthopedic is that the shock wave reactivates healing, surrounding tissue and bones, by micro disruption which means disorder of vascular tissues to grow on local bases. It basically helps in healing and recovering tissues. Radio wave: We have learned about the understanding of radio waves by the experiments of Hertz. Radio waves are used to transfer the pattern of a patients heartbeat by a monitor to a patients home or to a nearby hospital. They are also used to convey the condition of a patient from an ambulance to a hospital so that they are ready for the tangents emergency. Radio waves are used in medicine when paramedics who is a person trained to do medical work are connected to the scene where they are to do for the upcoming patient. Electromagnetic wave: Electromagnetic waves are produced by the motion of electrically charged particles. These waves are also called electromagnetic radiation because they radiate from the electrically charged particles. They travel through empty space as well as through air and other substances. Electromagnetic waves at low frequencies are referred to as electromagnetic fields and those at very high frequencies are called electromagnetic radiations. Electromagnetic wave plays a big major role in daily life. Electromagnetic waves are used in communications, radio and television broadcasting, cellular networks and indoor wireless systems. From the results of innovations, the use of this field is very high as people prefer more of new technologies now a day. The increasing number of mobile phones users rise significant concerns due to its potential damage on people exposed by radionuclide waves. Since mobile phones are used in positions very close to the human body and require a large number of base station antennas, the public and the scientists have doubts on its damages on human body. Ultra sound: In sound waves, waves are send into bodies and are reflected back at the interface between tissues. The time taken by the waves to reflect and return tells the depth of the reflected area. The research for sound wave went across human life and had affected since the world war 2 when the research was being done during the war of sound negotiation and ranging. In sasss for gray scale images, in 1965 for real time imaging. And today used in medical imaging. Sound waves have two types of waves, specula which means reflection from large surface and scattered which means reflection from small surface. Ultra sound waves are used as medicines as it captures the internal organs and structures . Ultra sonic waves: The application of ultrasonic wave in medicine is that it used n x-rays and magnetic imaging. Among the various modern techniques for the imaging of internal organs, ultrasonic machines like x ray are very expensive including its treatment. Ultrasound is also used for treating Joint pains and for treating certain types of tumors for which the mentioned problems are heated. A very effective use of ultrasound deriving from its nature as a mechanical vibration is the elimination of kidney and bladder. One of the important advantages of ultrasound is that it is a mechanical vibration. It can also be used in places where x-ray is damaging. Ultrasound, on the other hand, gives good contrast between various types of soft tissue. All the included waves have advantages and are helpful in humans daily life. Some waves are also lawful in places where other medical machines are dangerous like ultrasonic waves instead of x-rays. Application of these waves also helps in economic development as more and more patients will do their surgery through these waves in medicine. Bibliography: Medical Physics Ultrasound. (n. D. ). Genesis Networks. Retrieved September 15, 2013, from Genesis. Net. AU/?a]s/pro]sects/medical ultrasonic (physics) : Medical applications Encyclopedia Britannica. (n. D. ). Encyclopedia Britannica. Retrieved ultrasonic/64038/Medical-applications Shock wave treatment in medicine. J Bios. 2005] Pumped INCUBI. (n. D. ). National Center for Biotechnology Information. Retrieved September 1 5, 2013, from Incubi. Ml. NIH. Gob/pumped/15933416 Radio. (n. D. ). Saint Mars Roman Catholic Church I Saint Mars Roman Catholic Church. Retrieved September 15, 2013, from Starry. Was/highlights/ physics/radio_l ultrasonic (physics) : Medical applications Encyclopedia Britannica. (n. D. ). Encyclopedia Britannica. Retrieved September 15, 2013, from http:// www. Britannica. Com/Upchucked/topic/613488/ultrasonic/64038/Medical-applications

The Loyalty Card as Promotion Tool Essay Example | Topics and Well Written Essays - 6250 words - 1

The Loyalty Card as Promotion Tool - Essay Example Humby and Hunt (2004) are of the opinion that loyalty is more of an emotional concept thus resisting the definition in terms of behavior. This, therefore, champions that loyalty is an emotional concept resulting from the trust. Others also define loyalty as emotional concept built on empathy (East 1997). Building on the idea and recognition that opinions and feelings are active, variables that include but not restricted to social, physical environments, as well as individual abilities, have been known to pre-empt action. On the contrary, this view can be seen as being loyal functionally in that customer tends to be loyal to a company only because of convenience (Barnes 2002). According to (Grisaffe 2001), loyalty does not rotate around behavior, for instance, other is the buyer who has developed the cognitive rule in that they only buy low priced products, because of this such customers will look loyal to that brand over a period of time. This will only be interrupted by the entrance of another brand which is priced lower than the previous. The customer will again change to become loyal to the new product in the market. From this, it is evident that customers are more loyal to their decision rules as opposed to the brands and thereby a proof that loyalty is more than behavior. Of several definitions, the characterization seemed most suitable when discussing the Tesco Clubcard. Suggestions that daily life of loyalty entails â€Å"emotional commitment† and â€Å"monogamy† where one choice overrides the rest has been brought forward (Humby and Hunt 2004, pg 9). To bring out the comparison, retail loyalty concentrates on achieving a bit of goodwill, a slight margin of liking, a rise in the shift in terms of buying tendency. Customer satisfaction can be described in simple terms as the measure of a customer’s expectation is met in totality or not.  

Strategic management analysis Essay Example | Topics and Well Written Essays - 3000 words

Strategic management analysis - Essay Example The Paper will also suggest several recommendations that will be deemed as helpful in improving the Coffee house’s operations within the United States market. A Brief History of Starbucks. Starbucks is an American global corporation that specializes in selling coffee in its various coffee houses situated all over the world. Its main base of operations is currently at Seattle, Washington. The first Starbucks coffee shop opened its doors in the Seattle Springs area of Washington in 1971 and the company has grown to become the largest coffee house company in the world. It boasts of having about 19,972 stores which are spread out in 60 countries across the globe. Most of the company’s branches are currently located in the United States with an approximately 12,937 branches. ... Starbucks has also expanded its current investments into the entertainment industry and through its Starbucks Entertainment division as well as its hear Music brand, it also markets films, books and music. Most of the company’s product offerings are found to be not only seasonal but also specifically tailored particularly to satisfy the requirements of customers in the locality that the branch is located. Some of its branded products such as coffee and ice cream are sold in grocery stores all over the United States (Starbucks 2012). The United States Coffee House Market The Coffee Shop business and the entire coffee industry have had a significant boom over the recent years. This is especially so in the case of the specialty coffees offered by the industry. The market for these coffees has registered significant growth that has been spurred by the growing trend of the consumers becoming increasingly educated about the industry’s espresso-based drinks as well as how they are made (Starbucks 2012). According to research data conducted by First Research, the United States is host to about 20,000 coffee shop businesses whose total combined revenue has been estimated to stand at $10 billion as of 2011. More than 50% of these sales have been seen to be generated by the country’s top 50 coffee shop operators. Most of the county’s coffee shop operators have increasingly been spreading their business into the international market with Starbucks reporting to having set up shop in over 5,500 licensed locations outside the United States in 2010 (Green and Keegan 2012). The average gross margin for a single coffee shop in the country is

Substitution and Income Effect

Substitution and Income Effect Tendekai Mudariki The price of any given product will always change the customer’s choice of purchasing this can be in terms of quantity, quality or choosing the opportunity cost. In my essay I will be looking at how an increase in prices affect the substitution effect and the income effect and how customers react if the good has many close substitutions when there is an increase in price. Under the Substitution effect it suggest that the rise of the price in a good or decrease in income will leave the customers having to choose the alternative goods for example when the price of Coca-Cola drink raises this will lead to the rise of demand in Pepsi because Pepsi is the next best thing to a Coca-Cola. The substitution effect can also be used in reference in how workers can have a pick between leisure and wages, the more money on wages the less leisure time since wages will be more profitable than leisure. This effect tends to limit the customers buying demand behaviour that is limiting the choice of the consumer since they will not be able to purchase their choice of good.as shown below (in figure 1.1) The impact that a change in the price of a good has on the quantity demanded of a certain good, this will always lead to change in relative prices the rise of the price will make the quantity demanded to be less forcing some of the customers away to the next best thing tha t they can have. The income effect is the response of the quantity that is demanded to a change of real income or the price that is the rise of price in goods, (refer to figure 1.1) in the graph below shows the demand curve as it links up the relationship between the price of a certain item and the quantity that is demanded that is over a certain time. When the price falls there are two reasons why there will be more demand and this includes the substitution effect and income effect .the impact that a change in the price of a good has that effect on the quantity demanded of the good which then leads to the change of price of the good (substitution).the impact of a change in the quantity demanded of the good due to the change of their real income not being able to meet the quantity of goods that will satisfy them but still buy the good anyway but only have to make it lesser. The demand curve enlightens up the relationship between the price of the goods and the quantity demanded that is after a period of time. Considering both sides the substitution effect as shown on the diagram above from both sides of a price change that is going up and down. If we consider the both sides the higher the price an increase in price causes a decrease in the relative prices of substitute goods. Buyers tend to buy more of the other substitute goods and less of the good. The result is a decrease in thequantity demanded, and the lower the price then it leads to a decrease in price causing an increase in the relative prices of substitute goods. Buyers are inclined to buy less of the other substitute goods and more of this good. The result is an increase in the quantity demanded. As price falls, a person’s opportunity cost of purchasing the product falls as shown in the diagram above. A good with many close substitutes is likely to have an elastic demand .This is due to the price rise, buyers can actually choose to buy one of the close substitutes if there is a price increase of a good by shifting to one of the cheaper substitutes. However fewer substitutes’ choices will limit the options to shift. It is Important to distinguish between the income effect and the substitution effect of a price increase and the separation of the two is shown in figure 2 and it’s called the indifference theory. The price change can affect the way the buyers decisions in terms of buying staff this is called the income effect. Increases in price, while they dont affect the amount of your available budget, make you feel poorer than you were before, and by so you buy less of the product. Decrease in the price make you feel more superior and confident in terms of buying, and can the lead you of buying more of that good. When price increases, the demand for x changes because (1) good x is now more expensive relative to good y, and (2) the consumer’s purchasing power has gone down. Substitution Effect—the change in demand resulting from a change in the price ratio, leaving utility unchanged. Income Effect this is the change in demand resulting from the change in purchasing power (movement from the initial indifference curve to the final indifference curve), leaving the price ratio unchanged. The total effect = substitution effect + income effect. The substitution effect is always negative, due to diminishing MRS. The income effect is negative for normal goods(the substitution effect), and positive for inferior goods. A giffen good is an inferior good with the unique characteristic that an increase in price actually increases the quantity of the good that is demanded. This provides the unusual result of an upward sloping demand curve. This happens because of the interactions of the income and substitution effects. Depending on whether the good is inferior or normal, the income effect can be positive or negative as the price of a good increases. An inferior good means an increase in income causes a fall in demand.an inferior good has a negative PED. An example, of an inferior good is Tesco value bread. When your income rises you buy less Tesco value bread and more high quality, organic bread. Normal Good This means an increase in income causes an increase in demand. It has a positive PED. Note a normal good can be income elastic or income inelastic. The graph below shows the income effect and the substitution effect of a price increase for a normal good and inferior goods after a rise in price of a certain good. The Income Effect is the effect due to the change in real income. When the price goes up that means the consumer is not able to buy as many bundles that she could purchase before. In real terms this means that the customer now feels poorer. On the diagram 1.3 it shows the quantity of goods consumed for a normal good and it shows the figures A=14, B=4 and C=7 .from C to A it shows the substitution effect after subtrac ting 14 from 7 and from C to B after subtracting 7 from 4 it shows the income effect and the total effect is the total between the substitution and income effect as shown in the diagram (-7-3=-10). The same workings also applies to the inferior goods too. As shown in the diagrams when the price of the good goes up the quantity goes down Summing up my essay if a good is inferior, a drop in income (represented by a price increase) increases the quantity of the good that is demanded. The substitution effect is negative for any good that experiences a price increase. A giffen good faces an upward sloping demand curve because the income effect dominates the substitution effect, meaning that quantity demanded increases as price rises.