Short Answer TypeA consumer consumes only two goods. Explain consumer's equilibrium with the help of utility analysis.
The consumer’s equilibrium in case of consumption of two goods is explained by the Law of Equi-Marginal Utility. As per this law, a consumer allocates his expenditure between two commodities in such a manner that the utility derived from each additional unit of the rupee spent on each of the commodities is equal to the marginal utility of money.
In case the price of one commodity rises, less of this commodity and more of the other commodities will be purchased so that the proportion will be restored. In the case of durable goods, it may not be possible to maintain proportionality.
State the behaviour of marginal product in the law of variable proportions. Explain the causes of this behaviour.
Long Answer TypeExplain the conditions of consumer's equilibrium with the help of the indifference curve analysis.
From the following information about a firm, find the firms equilibrium output in terms of marginal cost and marginal revenue. Give reasons. Also find profit at this output.
|
Output (units) |
Total Revenue (Rs.) |
Total Cost (Rs.) |
|
1 |
7 |
8 |
|
2 |
14 |
15 |
|
3 |
21 |
21 |
|
4 |
28 |
28 |
|
5 |
35 |
36 |
Market of a commodity is in equilibrium. Demand for the commodity 'increases'. Explain the chain of effects of this change till the market again reaches equilibrium. Use diagram.
Short Answer Type
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