explain the principles of acceleration
Answers
Explanation:
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Answer:
The acceleration principle is an economic concept that draws a connection between changing consumption patterns and capital investment. It states that if appetite for consumer goods increases, demand for equipment and other investments necessary to make these goods will grow even more. In other words, if a population's income increases and its residents, as a result, begin to consume more, there will be a corresponding but magnified change in investment.
The acceleration principle is also referred to as the accelerator principle or the accelerator effect.
Explanation:
Companies frequently seek to gauge how much demand there is for their products or services. If they notice that economic conditions are improving and consumption is growing at a sustainable rate, they will likely invest to increase their output, particularly if they are already running close to full capacity. Failure to do so could see them miss out on a chunk of potential future revenues and lose ground to faster-responding competitors.According to the acceleration principle, capital investment increases at a faster rate than demand for a product. That is because investments to boost output often require significant outlays.
Economies of scale determine that investments are generally more efficient and come with greater cost advantages when they are significant. In other words, it makes more sense financially to increase capacity substantially, rather than just by a little bit.