A consumer spends Rs. 1000 on a good priced at Rs. 8 per unit. When price rises by 25 per cent, the consumer continues to spend Rs. 1000 on the good. Calculate price elasticity of demand by percentage method.
Elasticity of Demand by Percentage method:
E = % change in quantity demanded / % change in price.
| Price (Rs) |
Quantity |
Total Expenditure |
| 8 | 125 | 1000 |
| 10 | 100 | 1000 |
% change in quantity demanded = (New quantity demanded - old quantity demanded)/
initial quantity * 100
(100-125)/125 = -0.2*100 = -20
% in price = (New price – old price)/ Initial price*100
(10-8)/8 = 0.25 *100 = 25
Price elasticity of demand Rs = -20/25 = -0.8
Define cost. State the relation between marginal cost and average variable cost.
Or
Define revenue. State the relation between marginal revenue and average revenue.
The measure of price elasticity of demand of a normal good carries minus sign while
price elasticity of supply carries plus sign. Explain why?
When income of the consumer falls, the impact on price-demand curve of an inferior
good is: (choose the correct alternative)
Shifts to the right.
Shifts of the left.
There is upward movement along the curve.
There is upward movement along the curve.
What will be the impact of recently launched 'Clean India Mission' (Swachh Bharat
Mission) on the Production Possibilities curve of the economy and why?
Or
What will likely be the impact of large scale outflow of foreign capital on Production
Possibilities curve of the economy and why?
If Marginal Rate of Substitution is constant throughout, the Indifference curve will
be
Parallel to the x-axis.
Downward sloping concave.
Downward sloping convex.
Downward sloping convex.
There are large numbers of buyers in a perfectly competitive market. Explain the
significance of this feature.
Giving reason comment on the shape of Production Possibilities curve based on the
following schedule:
| Good X (units) | Good Y (units) |
| 0 | 10 |
| 1 | 9 |
| 2 | 7 |
| 3 | 4 |
| 4 | 0 |
