What is a market economy? 

When a firm is called 'price-taker'? 

Define budget set

What is meant by 'increase' in supply? 

5.

Define supply. 

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. 

Giving examples, explain the meaning of cost in economics. 

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. 

Explain the implication of 'freedom of entry and exit to the firms' under perfect competition. 

Explain the implication of 'perfect knowledge about market' under perfect competition.