﻿ State the behaviour of marginal product in the law of variable p

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## CBSE Class 12 Economics Solved Question Paper 2014

11.

Why are the firms said to be interdependent in an oligopoly market? Explain.

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12.

A consumer consumes only two goods. Explain consumer's equilibrium with the help of utility analysis.

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13.

What happens to the demand of a good when consumer's income changes? Explain.

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# 14.State the behaviour of marginal product in the law of variable proportions. Explain the causes of this behaviour.

Law of Variable Proportions:
The law of variable proportions state that as the quantity of one factor is increased, keeping the other factors fixed, the marginal product of that factor will eventually decline. This means that up to the use of a certain amount of variable factor, marginal product of the factor may increase and after a certain stage it starts diminishing.

Behaviour of MP

 Stages Stage's Name MP Range I Increasing Returns to a factor MP increases till point U From 0 to point U II Diminishing Returns to a factor MP falls  and touches x-axis From U  onwards III Negative Returns to a factor MP becomes negative Beyond x-axis

The main reason behind this behaviour of MP is Law of Diminishing Marginal Product. According to the Law of Diminishing Marginal Product, if the employment of variable factor is kept on increasing along with the constant level of the fixed factor, then finally a point will be reached where after, the marginal product of the variable factor will start falling and after this point the marginal product of any additional variable factor can be zero and even be negative.
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15.

Explain the conditions of consumer's equilibrium with the help of the indifference curve analysis.

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16.

Explain the three properties of the indifference curves.

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17.

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
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18.

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.

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19.

What are demand deposits?

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20.

What is involuntary unemployment?

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