Meaning: The production possibility curve is the curve which represents all those combinations of two commodities that can be produced with full utilization of resources in the most efficient way, which give the same level of satisfaction to a consumer.
Properties of PPC:
When price of a commodity X falls by 10 per cent, its demand rises from 150 units to 180 units. Calculate its price elasticity of demand. How much should be the percentage fall in its price so that its demand rises from 150 to 210 units ?
Given that
Percentage fall in price = 10
Initial demand = 150
New demand = 180
% Increase in demand = 30 × 100 = 20%
150
As we know that
ed= % Change in demand = -20 = -2
% Change in price 10
if demand increase from 150 to 210
% Change in demand = 60 × 100 = 40%
150
% Change in price = % Change in demand = 40 = -20
ed 2
Hence, the price will fall by 20% if the demand will increase from 150 to 210.
Distinguish between microeconomics and macroeconomics.
Basis of difference | Micro Economics | Macro Economics |
Meaning | Microeconomics is the study of economics at an individual, group or company level. | Macroeconomics, on the other hand, is the study of a national economy as a whole. |
Focus | Microeconomics focuses on issues that affect individuals and companies. This could mean studying the supply and demand for a specific product, the production that an individual or business is capable of, or the effects of regulations on a business. | Macroeconomics focuses on issues that affect the economy as a whole. Some of the most common focuses of macroeconomics include unemployment rates, the gross domestic product of an economy, and the effects of exports and imports. |
Example | An example of a microeconomic issue could be the effects of raising wages within a business. | where as in macroeconomics, a common issue is the effects of certain policies on the national or regional economy. |
Average revenue and price are always equal under : (choose the correct alternative)
(a) perfect competition only
(b) monopolistic competition only
(c) monopoly only
(d) all market forms
(d) all market forms
The demand of a commodity when measured through the expenditure approach is inelastic. A fall in its price will result in :
(choose the correct alternative)
(a) no change in expenditure on it.
(b) increase in expenditure on it.
(c) decrease in expenditure on it.
(d) any one of the above
(c) decrease in expenditure on it.
Complete the following table :
output units | total cost | average variable cost | marginal cost | average fixed cost |
0 | 30 | |||
1 | 20 | |||
2 | 68 | |||
3 | 84 | 18 | ||
4 | 18 | |||
5 | 125 | 19 | 6 |
output units | total cost | average variable cost | marginal cost | average fixed cost |
0 | 30 | |||
1 | 50 | 20 | 20 | 30 |
2 | 68 | 19 | 18 | 15 |
3 | 84 | 18 | 16 | 10 |
4 | 102 | 18 | 18 | 7.5 |
5 | 125 | 19 | 23 | 6 |
As we move along a downward sloping straight line demand curve from left to right, price elasticity of demand : (choose the correct alternative)
(a) remains unchanged
(b) goes on falling
(c) goes on rising
(d) falls initially then rises
(b) goes on falling
Show that demand of a commodity is inversely related to its price.
Explain with the help of utility analysis.
Or
Why is an indifference curve negatively sloped? Explain.
The demand of a commodity is inversely related to its price, suppose a consumer consumes a good X and its price falls. in that case, the consumer will get a greater marginal utility by consuming good X than the other goods. Thus, he will increase the consumption of good X and its demand will increase. however, in case the price rises, the consumer will get lower utility from the consumption of good X and thus, he will reduce the demand for it.
price of commodity X | demand of commodity of X |
10 | 100 |
15 | 50 |
20 | 25 |
25 | 15 |
This analysis of the above schedule shows that quantity demanded of a commodity holds a negative relationship with the price.
It shows that a higher price of quantity demanded of X falls and vice versa. as the price increases from Rs 10 to Rs 15, the quantity demanded falls from 100 units to 50 units.
Define market demand.
Market demand is the aggregate quantity demanded of a commodity by all the consumers, who are willing to purchase at a given price during a given period of time.
State any one feature of oligopoly.