Discounting. according to economic theory, agricultural land values (prices) equal the present value of expected future rents, where rents are calculated as the difference between revenue received and production costs. suppose the interest rate is 5% and expected future rents on 1 acre of land are as follows: a. year 1: $125 b. year2: $250 c. year3: $3201. what is the price of land?

$622.233

Explanation:

The computation of the price of land is shown below:

The discount factor should be computed by

= 1 ÷ (1 + rate) ^ years

where,  

rate is 5%  

Year = 0,1,2,3

Discount Factor:

For Year 1 = 1 ÷ 1.05^1 = 0.9524

For Year 2 = 1 ÷ 1.05^2 = 0.9070

For Year 3 = 1 ÷ 1.05^3 = 0.8638

So, the calculation of a Present value of all yearly cash inflows are shown below

= Year 1 cash inflow × Present Factor of Year 1 + Year 2 cash inflow × Present Factor of Year 2 + Year 3 cash inflow × Present Factor of Year 3  

= $125 × 0.9524 + $250 × 0.9070+ $320 × 0.8638

= $119.047 + $226.7574 + $276.428

= $622.233

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.

in terms of experimental research, mcdonald’s charging different prices in the two cities relates to