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1)

Economics Nov 11, 2020

1) . What are the determinants of the amount of investment? Give a detailed explanation

2) What are the determinants of the location of investment? Give a detailed explanation

Expert Solution

1) The  determinants of investment include

  1. Expectations: if expectation about profitability are high then firm will make investment.
  2. the level of economic activity. if there is large economic activities day takeing place and they are increasing day by day then investment would be high.
  3. the stock of capital : if firm is intended to increase the stock of capital then they would prefer to purchase assets and make investment.
  4. the capacity utilization rate : if capacity of factories or industry increase with investment then firm will prefer to invest.
  5. the cost of capital goods : if cost of capital goods is less then it would urge the firm to have high investment in capital goods.
  6. technological change : if new technology development take place and it is effcient to produce goods with the same then investment would be lucrative.
  7. public policy : if investment is public facilities oriented then private firm will do it to increase the profit in the short and long run .

2. The  determinants of location of investment include

  1. market proximity: if investment done in the location which is near to market where goods can easily supply the it would attract the investment.
  2. raw-material availability: if location is full of raw material where industry or firm can install then it would attract investment.
  3. easy availability of skilled labor place : if skilled human resources are easily available then this location is good for investment
  4. efficient distribution channel: if good manufactured are easily distributed from the location then it would attract investment.
  5. Government tax holiday in remote area. : if government provide tax holiday to firm who invest in the remote location then this place would attract investment
  6. infrastructure availability (electricity, water facility): if the firm finds the good infrastructure at the place when electrification and water facilitiy are available then they would attract investment.
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