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Income Tax
Recently, I put up my residential property for rent as I would be going overseas shortly for a couple of year. I had to incur advertising. I had also to seek legal advice tenancy agreement. Can I deduct such expenses against my rental incomes for income tax purposes? Section of the income tax act govern deduction of expenses wholly and exclusively incurred in the production of the income are deductible. The advertising and legal fees in this case are expenses incurred not in the production of the rental income but in putting you in a position to earn the income i.e. securing the first tenancy from witch the income then arises. As such the expenses are not deductible under section 14. Read more…
Strategic Behavior of marketing
Limit price models suggest a relatively sanguine attitude toward the exercise of market power by dominant firms. In a world of limit price behavior, dominant firms that wish to preserve their position can charge a price no higher than the average cost expected by a new firm after entry. Dynamic limit price models predict that dominant firms will yield market share over time and gradually give up the ability to control the market price.Consideration of possible strategic behavior by dominant firms suggests a much less optimistic view. Read more…
Limit Pricing Case Study
Historically, there have been substantial costs of entry into the steel industry. The technology favors vertical integration at least from the extraction of iron through smelting, refining, rolling, and the production of finished steel products such as steel plate and bars. Fully integrated entry requires a substantial investment. Because such entry is risky, the cost financial capital will be higher for an entrant than a going concern. This will place entrants at a cost disadvantage compared with operating firms. Further, entry into the steel industry involves large sunk costs: there is not much one can do with a steel mill except produce steel. Read more…
Closer look market
One assumption of the static limit price model is that the potential entrant/ fringe firm expects the dominant firm to maintain output in the face of entry. We used this assumption to draw a residual demand curve for the potential entrant Figure 4 – 1. The entrant may very well expect different behavior from the dominant firm. It may expect the dominant firm to expand its output and lower its price in the face of entry in order to preserve market share this was AMXCO’s reaction to entry by Vebco, in the first case study. If the entrant expects the dominants firm to expand curve closer to the origin than suggested by Figure 4 – 1. All else equal, a smaller residual demand will make entry less likely. Read more…
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