ECON308 Lecture Notes - Lecture 7: Unsecured Debt, Loan, Savings And Loan Association
6 Jan 2018
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Approximately what percentage of us businesses employ more than 1000 workers: 1, 10, 50, 85, collateral: property that is pledged to the lender to guarantee payment in the event that the borrower is unable to pay debt payments. Example: house for a mortgage; car for an auto loan; cash, deposit, inventory for business loans: collateralized debt = secured debt, unsecured debt no collateral required. Example: credit card debt (not secured credit cards) Transaction costs : economies of scale: (as you increase production, cost of production decreases); the reduction in transaction cost per dollar of investment as the size (scale) of the transaction increases. Car market: lemon: a car of bad quality, plums (peach): a car of good quality. Plum 17,000 , lemon 12,000 , buyer is willing to pay 14,500 (average) The lemons problem: how adverse selection in uences nancial structure.
