( 1.3 × 10^-2 ) × ( 5 × 10^-2 )= ?
Because the equation uses only multiplication, the order of the multiplication does not matter. We can remove the parentheses and reorder the equation to: 1.3 × 5 × 10^-2 × 10^-2 When you multiply exponents with the same base, you simply add the exponents together. We can simplify by combining the base 10 exponents to 10^-4 and we can multiply the 5 and 1.3 together to get: 6.5 × 10^-4 When you have a negative exponent, you make a fraction with 1 as the numerator and the positive version of the exponent as the denominator: 10^-4 = 1/10^4 which equals 1/10,000 Now we have 6.5 x 1/10,000. To multiply these together, we multiply the 6.5 by the numerator, 1, to get 6.5/10,000 Because we want whole numbers with fractions, we multiply both the numerator and the denominator by 2 to get 13/20,000. Our answer is 13/20,000
The price of a certain video game system doubles due to an unexpected increase in component prices. Sales of this system drop 90%. At the same time, gas prices double due to a supply shortage. Gas sales drop 15%. Why did gas prices only drop 15%, while sales of the video game system dropped 90%?
There may be multiple reasons for this difference, but essentially these items have a different "Price Elasticity of Demand". Items with a low price elasticity of demand experience smaller changes in quantity demanded due to a price increase than items with a higher price elasticity of demand. With the video game system, there may be reasonable substitutes, such as other video game systems or simply other ways to entertain yourself rather than that particular game system. In the case of gas, many people may not have a reasonable alternative to driving to work and the sale of gas will not decrease at the same rate as video game systems.
Why is future income discounted to a present value?
The concept that present money is worth more than future income is known as the Time Value of Money. A future payout of $10,000, 10 years in the future is worth less than $10,000 today because that $10,000 today could be invested to earn more money. For example, if we believe that an investment of $7,000 today will result in a $10,000 investment value 10 years in the future, then the present value of a $10,000 payment 10 years in the future is $7,000, not $10,000.