Define budget set
The set of bundles available to the consumer is called the budget set. The budget set is the collection of all bundles that the consumer can buy with her income at the prevailing market prices. It is represented by the following condition of inequality: P1x1 + P2x2≤M
Draw average revenue and marginal revenue curves in a single diagram of a firm which can sell more units of a good only by lowering the price of that good. Explain.
8 units of a good are demanded at a price of Rs. 7 per unit. Price elasticity of demand is (-)1. How many units will be demanded if the price rises to Rs. 8 per unit? Use expenditure approach of price elasticity of demand to answer this question.
Explain the implication of 'freedom of entry and exit to the firms' under perfect competition.
