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30 - General Principles of Financial Planning (c) Time has the greatest effect on elasticity; when the price of a product increases, consumers will reduce their consumption more in the long run than in the short run called the second law of demand (5) Price inelasticity is manifested when a large price change does not cause much change in the quantity demanded (a) Inelastic goods have few substitutes An example of an inelastic good is gasoline Even as the price rises, people still need to buy gasoline (b) Perfect inelasticity is represented by a demand curve that is vertical (6) Movement along the demand curve represents a change in quantity demanded resulting from a change in price However, some factors will cause a shift in demand A shift in demand is caused by (a) Changes in consumer income (b) Changes in the price of related goods (substitutes and complements) If two goods go together, they are complements for example, ice cream and hot fudge A price rise in one good will cause a drop in demand for its complement (c) Changes in consumer expectations (d) Changes in the number of consumers in the market (e) Demographic changes (f) Changes in consumer tastes and preferences B Supply curve (1) The law of supply indicates that a higher price will increase the supply of a good (2) There is a direct relationship between the price of a good and the amount supplied in the marketplace (3) The supply curve is elastic when a price change leads to a large change in quantity supplied This happens when resources are added inexpensively The supply curve is inelastic when a price change leads to a small change in supply (4) Change in quantity supplied is identi ed as movement along the supply curve It is the willingness of producers to offer a good at different prices A shift in the entire supply curve is referred to as a change in supply (5) Factors that increase the opportunity cost of producing a good will discourage production and shift the supply curve inward to the left; the reverse is also true Such factors include the following: (a) Changes in resource prices Higher resource prices (and opportunity costs) will reduce the supply of a good, causing a shift to the left in the supply curve (b) Changes in technology Lower cost techniques will increase production and decrease the opportunity cost of a good, causing the supply curve to shift outward to the right (c) Natural disasters and political disruptions C Income elasticity is the sensitivity of demand to change in consumer income (1) An inferior good has negative income elasticity This means that when income increases, the quantity demanded decreases; when income decreases, the quantity demanded increases An example of an inferior good is margarine (2) A normal good has positive income elasticity When income increases (decreases), the quantity demanded also ncreases (decreases) An example of a normal good is butter.



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34 - General Principles of Financial Planning (2) The anticipation of de ation strongly suggests that investors should acquire those nancial assets whose values will not fall (3) The safest strategy is to acquire short-term liquid assets, such as bank deposits, because de ation will increase the purchasing power of money (4) De ation makes long-term debt obligations good investments, but an investor should purchase only bonds of excellent quality, because de ation may be accompanied by bankruptcies as rms are unable to meet their nancial obligations (5) The same stress on quality applies to common stocks Because many rms will experience falling demand and declining pro t margins, quality should be stressed in purchasing stocks D Recession and economic stagnation (1) During a recession, the Federal Reserve will put money into circulation and expand the supply of credit This expansion will at least initially decrease interest rates until the stimulus increases the level of economic activity (2) The federal government will adopt an expansionary scal policy Lower taxes and increased government expenditures will increase aggregate demand for goods and services This increased demand is designed to stimulate economic activity, which reduces the level of unemployment (3) To take advantage of the economic stimulus, the investor will seek to move out of short-term money market instruments into common stocks of rms that will bene t from the expansionary monetary and scal policy (4) Once the investor identi es the rms most likely to bene t from the expansionary monetary and scal policy, he or she may adopt any of a number of individual strategies: (a) A conservative strategy may include the purchase of convertible securities (ie, convertible bonds and preferred stock) and common stocks of rms with low beta coef cients Fixed-income securities ay be purchased in anticipation of lower interest rates But the investor must be willing to move rapidly out of xed-income securities, because they do not bene t from economic expansion and may be hurt if the expansion leads to higher interest rates (b) An aggressive strategy designed to take advantage of expansionary scal policy will stress less current income (ie, no xed-income securities) and more potential for capital gains The investor will then primarily purchase common stocks of rms with low payout ratios that retain earnings to nance expansion 7 Yield curve A A graph showing the relationship between term to maturity and yield to maturity is known as a yield curve B The yield curve shows the relationship between interest rates and time, typically relating to government Treasury securities C The yield curve is important to investors because as rates change, they usually do not change by the same amount of basis points across maturities D Yield curve risk is the risk that yields for different maturities may not change by the same amount in the presence of an interest rate change (1) The risk is measured with the help of duration a measure of bond price sensitivity to interest rates.

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Let's look at each of the SafeArray and SafeArrayBound elements individually, as well as the different flags we can apply to the fFeatures field Although tedious, this exercise is important because we will read these values from VB-created arrays as well as set them in descriptors that we create ourselves cDims is the number of dimensions in the array This must be set to 1 for a one-dimensional array cbElements is the number of bytes per element The memory address for the Index element in an array is calculated as pvData + Index * cbElements cLocks is a lock count for the array When an array is locked, you cannot ReDim, ReDim Preserve, or Erase the array You can change the value of elements in the array, but you cannot modify or destroy the array's structure VB locks an array when you pass an element of the array to a ByRef parameter or when you use a structure-type array element in a With statement Trying to Erase or ReDim [Preserve] an array with cLocks > 0 generates an error 10 ("This array is fixed or temporarily ocked") pvData is the element in an array that points to the memory for the array's data pvData is the main player in the SafeArray structure: All other fields play supporting roles pvData is stored as a Long value, which has the same length as the void* pointer in the OLE Automation SAFEARRAY definition cElements specifies the number of elements allowed per bound ILbound is the lower bound of the array dimension VB's LBound function reads its value directly from this element, while UBound is calculated as ILbound + cElements- 1 fFeatures is a very important field The flags set in fFeatures enable the SafeArray* API set to correctly destroy an array and the standard COM marshaling engine to successfully move the array between threads and processes These flags fall into two categories: they specify either the type of elements in the array or the method used to allocate the memory for the descriptor and the array data itself.

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