Explain “large number of buyers and sellers” features of a perfectly competitive market.
The number of buyers and sellers operating under perfect competition is very high. As the number of individual sellers very large, an individual seller cannot fix the price. Similarly no single buyer can fix the price or change it by his action. Even if he increases or reduces demand, it does not make any effect on the total demand in the market. Price of a product is determined by the interaction of total demand and total supply in the market. Hence every seller and buyer under perfect competition is a price taker and not a price maker.
Explain the Law of Variables Proportions with the help of total product and marginal product curves.
Explain any two factors that affect the price elasticity of demand. Give suitable examples.
The price elasticity of demand for a good is − 0.4. If its price increases by 5 percentage, by what percentage will its demand fall? Calculate.
Giving reasons, state whether the following statements are true or false.
A monopolist can sell any quantity he likes at a price.
Production in an economy is below its potential due to unemployment. Government starts employment generation schemes. Explain its effect using production possibilities curve.