What is Economics?
“Economics
is the study of how we the people engage ourselves in production, distribution
and consumption of goods and services in a society.”
Normative economics:
Normative
economics refers to value judgments, e.g. what “ought” to be the goals, of
public policy. Normative statements cannot be tested.
Positive Economics:
The
analysis of facts and behavior in an economy OR “the way things are.”
Goods
Are the things which are produced to be sold.
Services
Involve
doing something for the customers but not producing goods.
Factors of production:
Factors
of production are inputs into the production process. The factors of production
are:
Ø • Land includes the land
used for agriculture or industrial purposes as well as
Natural resources taken from
above or below the soil
Ø • Capital consists of
durable producer goods (machines, plants etc.) that are in
Turn used for production of
other goods
Ø • Labor consists of the
manpower used in the process of production.
Ø • Entrepreneurship includes
the managerial abilities that a person brings to the
Organization Entrepreneurs can
be owners or managers of firms.
Scarcity:
Shortage
of resources because economic resources are unable to supply all the goods
demanded.
Rationing
A
process by which we limit the supply or amount of some economic factor which is
scarcely available
Economic Systems:
A free
market/capitalist economy is a system in which the questions about what to
produce, how to produce and for whom to produce are decided primarily by the
demand and supply interactions in the market.
Dictatorship:
A system in which economic decisions are
taken by the dictator which may be an individual or a group of selected people
Command or planned economy:
A mode
of economic organization in which the key economic functions – for whom, what,
how to produce are principally determined by government directive.
Optimum:
Producing
the best possible results (also optimal)
Equity in economics:
A
situation in which every thing is treated fairly or equally, i.e. according to
its due share
Nepotism:
Doing unfair favors for near ones when in power
Microeconomics:
The
behavior of individual elements in the economy
Macroeconomics:
The
economy as whole or on aggregate level
Rational choice:
The
choice based on pure reason and without succumbing to one’s emotions or whims.
Barter trade:
A
non-monetary system of trade in which “goods” not money is exchanged.
It is
what must be given up or sacrificed in making a certain choice or decision.
Marginal Cost:
Marginal
cost is the increment to total costs of producing an additional unit of some
good or service.
Marginal benefit:
The
increment to total benefit derived from consuming an additional unit of good or
service.
Production Possibility Frontier (PPF):
The maximum
amount of goods and services which the country can produce in a given time with
limited resources, given a specific state of technology
Economic growth:
An
increase in the total output of a country over time
Perfect competition:
A
situation in which no firm or consumer is big enough to affect the market
price.
Shortage:
Shortage
is a situation in which demand exceeds supply, i.e. producers are unable to
meet market demand for the product.
Surplus:
Situation
of excess supply, in which market demand falls short of the quantity supplied
Goods market:
Market
in which goods are bought and sold for the purpose of consumption
Factors markets:
Markets
in which factors of production are bought and sold, for the purpose of
production
Normal goods:
Whose
quantity demanded goes up as consumer income increases.
Inferior goods:
Whose
quantity demanded goes down as consumer income increases.
Giffen goods:
A
special case of inferior goods whose quantity demanded increases when the price
of the good rises
Price effect:
The sum of
income and substitution effects
Income effect:
The
effect of a price rise on quantity demanded that works through a decline in the
real income (or purchasing power) of the consumer.
Substitution effect:
The
effect of a price rise on quantity demanded that works through the consumer
switching to substitutes goods.
Substitutes:
Goods
that compete with one another or can be substituted for one another, like
butter and margarine
Compliments:
Goods
that go hand in hand with each another.
Cash crops:
The
crops which are not used as food but as a raw material in factories e.g. cotton
Demand:
Demand
is the quantity of a good buyer wish to purchase at each conceivable price.
Law of demand:
If the
price of a certain commodity rises, its quantity demanded will go down, and
vice-versa.
Demand function:
An
equational representation of demand as a function of its many determinants
Demand curve:
A graph
that obtains when price (one of the determinants of demand) is plotted against
quantity demanded.
Supply:
Supply
is the quantity of a good seller wish to sell at each conceivable price.
The law of supply:
The
quantity supplied will go up as the price goes up and vice versa.
Supply schedule:
A table
which shows various combinations of quantity supplied and price.
Supply function:
An
equational representation of supply as a function of all its determinants
Supply curve:
When
price is plotted against quantity supplied.
Determinants of supply are:
Ø • Costs of production
Ø • Profitability of alternative
products (substitutes in supply)
Ø • Profitability of goods in
joint supply
Ø • Nature and other random shocks
Ø • Aims of producers
Ø • Expectations of producers
Equilibrium:
Equilibrium
is a state in which there are no shortages and surpluses; in other words the quantity
demanded is equal to the quantity supplied.
Equilibrium price:
It is
the price at which the quantity demanded is equal to the quantity supplied.
Equilibrium quantity:
The
quantity at which the quantity demand is equal to the quantity supplied.
Algebraic Representation of Equilibrium:
If we
have following demand and supply functions,
Qd = 100 – 10 P
Qs = 40 + 20 P
In equilibrium,
Qd = Qs
Therefore
100 - 10P = 40 + 20P
20P + 10P = 100 - 40
30P = 60
P = 60/30
P = 2
Putting the value of price in any of demand and supply
equation,
Q = 100 – 10x2 (or 40 + 20x2)
Q = 100 – 20
Q = 80
The equilibrium price is 2 and the equilibrium quantity is
80.
Government and Price-Determination:
The
government may intervene in the market and mandate a maximum price (price
ceiling) or minimum price (price floor) for a good or service.
Price ceiling:
The
maximum price limit that the government sets to ensure that prices don’t rise
above that limit (medicines for e.g.).
Price floor:
The
minimum price that a Government sets to support a desired commodity or service
in a society (wages for e.g.).
Social cost:
The cost
of an economic decision, whether private or public, borne by the society as a
whole.
Marginal social cost:
The
change in social costs caused by a unit change in output
ELASTICITIES
Elasticity
is a term widely used in economics to denote the “responsiveness of one
variable to changes in another.”
Types of Elasticity:
There
are four major types of elasticity:
Ø • Price Elasticity of Demand.
Ø • Price Elasticity of Supply.
Ø • Income Elasticity of Demand.
Ø • Cross-Price Elasticity of
Demand.
Price Elasticity of Demand:
Price
elasticity of demand is the percentage change in quantity demanded with respect
to the percentage change in price.
PЄd = Percentage change in Quantity demanded / Percentage
change in Price
Where Є
= Epsilon; universal notation for elasticity.
Price Elasticity of Supply:
Price
elasticity of supply is the percentage change in quantity supplied with respect
to the percentage change in price.
PЄs = Percentage change in Quantity Supplied / Percentage
change in Price
Income Elasticity of Demand:
Income
elasticity of demand is the percentage change in quantity demanded with respect
to the percentage change in income of the consumer.
YЄd = Percentage change in Quantity demanded / Percentage change
in Income
Cross-Price Elasticity of Demand:
Cross
price elasticity of demand is the percentage change in quantity demanded of a
specific good, with respect to the percentage change in the price of another
related good.
PbЄda =
Percentage change in Demand for good a / Percentage change in Price of good b
Point Elasticity:
Point
elasticity is used when the change in price is very small, i.e. the two points
between
The
formula for point elasticity can be illustrated as:
Є= ΔQ x P
Δ P Q
Or this
formula can also be written as:
Є= dQ x P
dP Q
Where d
= infinitely small change in price.
Arc Elasticity:
Arc
elasticity measures the “average” elasticity between two points on the demand
curve.
Є = Δ Q ÷ Δ P
Q P
To
measure arc elasticity we take average values for Q and P respectively.
Elastic and Inelastic Demand:
Slope
and elasticity of demand have an inverse relationship. When slope is high
elasticity of demand is low and vice versa.
Perfectly inelastic demand:
When the
slope of a demand curve is infinity, elasticity is zero
Perfectly elastic demand:
When the
slope of a demand curve is zero, elasticity is infinite.
Unit elasticity:
A 1%
change in price will result in an exact 1% change in quantity demanded. Thus
elasticity will be equal to one. A unit elastic demand curve plots as a
rectangular hyperbola.
Note
that a straight line demand curve cannot have unit elasticity as the value of
elasticity changes along the straight line demand curve.
Total revenue and Elasticity:
Total
revenue (TR) = Price x Quantity; when the demand curve is inelastic, TR
increases as the price goes up, and vice versa; when the demand curve is
elastic, TR falls as the price goes up, and vice versa.
Determinants of price elasticity of demand:
a) Number of close substitutes
within the market - The more (and closer) substitutes available in the market the
more elastic demand will be in response to a change in price. In this case, the
substitution effect will be quite strong.
b) Percentage of income spent on a
good - It may
be the case that the smaller the proportion of income spent taken up with
purchasing the good or service the more inelastic demand will be.
c) Time period under consideration –
Demand tends to be more elastic in the
long run rather than in the short run.
Effects of Advertising on Demand Curve:
Advertising
aims to:
• Change
the slope of the demand curve – make it more inelastic. This is done by generating
brand loyalty;
• Shift
the demand curve to the right by tempting the people’s want for that specific product.
Normal Goods:
If the
sign of income elasticity of demand is positive, the good is normal.
Inferior Goods:
If sign
is negative, the good is inferior.
Determinants of Income Elasticity of Demand:
The
determinants of income elasticity of demand are:
• Degree
of necessity of good.
• The
rate at which the desire for good is satisfied as consumption increases
• The
level of income of consumer.
Short Run:
Short
run is a period in which not all factors can adjust fully and therefore
adjustment to shocks can only be partial.
Long run:
A period
over which all factors can be changed and full adjustment to shocks can take
place.
Rational Choice:
Rational
choice consists in evaluating the costs and benefits of different decisions and
then choosing the decision that gives the highest benefit relative to cost.
Ignorance and Irrationality:
There is
a difference between “ignorance” and “irrationality.” A person operating under uncertainty
and thus at least partial ignorance can still make rational decisions by taking
into account all the information she has at her disposal. Rationality is an
ex-ante concept.
CONSUMER BEHAVIOR:
There
are two approaches to analyzing consumer behavior;
•
Marginal utility analysis
•
Indifference curve approach.
Utility is the usefulness, benefit or satisfaction derived from the
consumption of goods and services.
Total utility is the entire satisfaction one derives
from consuming a good or service.
Marginal utility is the additional utility derived from
the consumption of one or more unit of the good.
The Law of Diminishing Marginal Utility:
The law of diminishing marginal utility
states that as you consume more and more
of a particular good, the satisfaction or utility that you derive from each additional unit falls.
The marginal utility curve
slopes
downwards in a MU-Q graph showing the principle of diminishing marginal
utility.
Consumer Surplus and Optimal Point of Consumption:
Consumer surplus is the difference between
willingness to pay and what the consumer
actually has to pay: i.e. CS= MU-P.
The optimal point of consumption:
That point where consumer surplus becomes
zero. If marginal utility is greater than
price, consumption will increase causing MU to fall until it equals price, and vice versa.
The Equi-marginal Principle:
In the
case of more than two goods, optimum consumption point can be arrived at by
using the equi-marginal principle. This state that a person will derive a
maximum level of TU from consuming a particular bundle of goods when the
utility derived from the last dollar spent on each good is the same:
·
MUa = MUb = MUc …………….
·
Pa Pb PC
The Problem of Uncertainty:
The
problem of uncertainty is integral to consumption decisions especially in the
matter of purchasing durable goods. Uncertainty means assigning probabilities
to the outcomes.
A
consumer’s response to uncertainty depends upon her attitude to risk: whether
she is:
§ Risk averse.
§ Risk-loving.
§ Risk neutral.
Risk means to take a chance after the probabilities have been
assigned.
The odds ratio (OR) is the ratio of the probability of
success to the probability of failure. It can be equal to 1, less than 1 or
greater than 1. If it is equal to 1 we call it fair odds, if less then 1 unfavorable
odds, and if greater 1 then favorable odds.
A risk neutral person is one who buys a good when OR > 1.
He is indifferent when OR = 1 and will not buy when OR < 1.
A risk averse person will not buy if OR < 1. He will also
not buy if OR = 1. He might also not decide to buy if OR > 1.
A risk loving person will buy if OR > 1 or = 1, but he
might also buy when OR is < 1.The degree of risk aversion increases as your
income level falls, due to diminishing marginal utility of income.
Risk hedging:
Can be
used to reduce the extent to which concerns about uncertainty affect our daily
lives.
An indifference curve:
A line which charts out all the different points on which the
consumer is indifferent with respect to the utility he derives.
Marginal rate of substitution
(MRS):
The indifference curve between any two points is given by the
change in the quantity of good Y divided by change in the quantity of good X.
This is called the.
A diminishing marginal rate of substitution (MRS) is related to the principle of diminishing marginal utility. MRS is equal to the ratio of the marginal utility of X to the marginal utility of Y.
§ dY = MUX = MRS
§ dX MUY
The indifference curve for perfect substitutes is a
straight line, while it is L-shaped for perfect compliments.
The Budget Line:
The
budget line shows various combinations of 2 goods X & Y that can be
purchased.
Input price ratio:
Budget
line’s slope –Px/PY is called input price ratio.
The optimum consumption point for the consumer:
Where
the budget line is tangent (intersect) to the highest possible indifference
curve at such a point, the slopes of the indifference curve and the budget line
are equal. In other words:
·
MRS = Px/Py = ΔY/ΔX = MUx/MUy.
Just as
we can use indifference analysis to show the combination of goods that
maximizes utility for a given budget, so too we can show the least-cost combination
of goods that yields a given level of utility.
The Income Consumption Curve (ICC):
Change
in curve due to change in income
Price Consumption Curve (PPC):
Change
in curve due to change in Price
When the price of one good change, two things happen:
• One the purchasing power of consumer
changes i.e., the budget line shifts (leads to income effect).
• Secondly, the slope of budget line
changes due to a change in the relative price ratio (leads to substitution
effect).
Income & Substitute Effect:
The substitution effect of a price rise is always negative,
while the income effect of a price rise on the consumption of a normal
good is negative. The income effect for an inferior good is positive.
The income effect of a Giffen good is so positive that it offsets the negative substitution
effect, therefore.
Limitation of Indifference Approach:
The
indifference curves approach has the following limitations:
§ Indifference curve analysis is
only possible for 2 or at best for 3 goods.
§ It is almost impossible to
practically derive indifference curves.
§ The consumer may not always
behave rationally.
§ The consumer may not always
realize the level of utility (ex-post) from consumption, that she originally
expected (ex-ante).
§ Indifference curve analysis can
not help when one of the goods (X or Y) is a durable good.
Firm:
A firm
is any organized form of production, in which someone or a collection of
individuals are involved in the production of goods and services. A firm can be
sole proprietorship (one person ownership), partnership (a limited number of
owners) or a limited company (a large number of changing shareholders).
Production Function:
A
production function is simply the relationship between inputs & outputs.
Mathematically
it can be written as:
Q = f (K, L, N, E, T, P……….)
Where,
Q =
Output = Total product produced
K =
Capital
L =
Labor
N =
Natural resources
E =
Entrepreneurship
T =
Technology
P =
Power
Cobb Douglas production function:
Q = A Kα L1 – α
Where:
Q =
output
L =
labor input
K =
capital input
A, α and
1 – α are constants determined by technology.
Short run:
Short
run is a period of time in which at least one of the factors of production is
fixed or Unchangeable
Long run:
Long run
is a period of time in which all the factors of production used in the production
are flexible. The actual length of the short run and long-run can vary
considerably from industry to industry.
The Law of Diminishing Marginal Returns:
The law
of diminishing marginal returns states that as you increase the quantity of a
variable factor together with a fixed factor, the returns (in terms of output)
become less and less.
The total physical product (TPP)
A factor
(F) is the latter’s total contribution to output measured in units of output
produced.
Average physical product (APP):
Is the TPP
per unit of the variable factor
APP = TPPF/QF
Marginal physical product (MPP)
Is the
addition to TPP brought by employing an extra unit of the variable factor More
generally,
MPPF = ΔTPPF/ΔQF
Relationship between APP and MPP:
• If the
marginal physical product equals the average physical product, the average physical
product will not change.
• If the
marginal physical product is above the average physical product, the average physical
product will rise.
• If the
marginal physical product is below the average physical product the average physical
product will fall.
If population is increasing and
output remains constant:
Then
diminishing returns set in and therefore average per capita production/consumption
can be expected to fall ceteris paribus(all factor effect demand should remain
constant).
A firm
is confronted with three more decisions;
§ Scale of production,
§ Location, size of industry
§ Optimum combination of inputs.
The Scale of Production:
Change in production or increasing, decreasing
return if due to the change in scale of production.
The location, size of Decision:
The
location decision depends upon both the location of raw material suppliers and
the location of the market. The nature of the product, transportation costs,
availability of suitable land for production, stable power supply and good
communications network, availability of qualified and skilled workers, level of
wages, the cost of local services and availability of banking and financial
facilities are among some other important factors. The size of an industry can
lead to external economies and diseconomies of scale.
External Economies and Diseconomies of Scale:
External
economies are benefits accruing to any one firm due to actions or the presence
of other firms. For example, advertising by a rival industry, setting up of
credit information bureaus by banks.
The Optimum Combination of Factors:
The
optimum combination of factors will obtain at the point where the marginal
physical product of the last dollar spent on all inputs is equal, i.e.:
MPPK = MPPL
PK PL
Isoquant:
An
isoquant represents different combinations of factors of production that a firm
can employ to produce the same level of output.
Marginal Rate of Technical Substitution (MRTS):
The
slope of an isoquant is called marginal rate of technical substitution (MRTS).
Budget Line:
Amount
of money needed or available
COST:
Expense incurred in production.
Variable Cost:
Costs
which vary with the level of activity (or output) are called variable costs.
Fixed Costs:
Costs
which do not vary with the level of activity or output are called fixed costs.
In long run there are no fixed costs.
Relationship between costs and
productivity:
There is
an inverse relationship between costs and productivity, i.e. as
productivity rises, costs fall and vice versa.
Total Cost:
Total
cost (TC) is the sum of all fixed and variable costs.
Average Cost:
Average
cost (AC) is the vertical summation of the AFC & AVC, where
AC = AFC + AVC
AFC = TFC/Q
and
AVC = TVC/Q.
Marginal Cost:
Marginal
cost is the addition to TC caused by a unit increase in output. More generally:
MC = ΔTC/ΔQ.
The Long-Run Average Cost Curve (LRAC):
The
long-run average cost (LRAC) curve for a typical firm is U shaped.
As a
firm expands, it initially experiences economies of scale (due to productive efficiency,
better utilization of resources etc.); in other words it faces a downward sloping
LRAC curve.
After
the scale of operation is increased further, however, the firm achieve constant
costs i.e., LRAC become flat.
If the
firm further increases its scale of operation, diseconomies of scale set in (due
to problems with managing a very large organization etc.) and the LRAC assumes
a positive slope.
Long-run marginal cost (LRMC):
In case
a firm is enjoying economies of scale, each incremental unit will cost less
than the preceding one i.e., LRMC will be falling. The opposite will be true
for diseconomies of scale. In case of constant costs, each incremental unit
will cost the same, i.e., the LRMC will be constant.
Envelope curve:
The LRAC
curve for a firm is actually derived from its SRAC curves. The exact shape of
the LRAC is a wave connecting the least cost parts of the SRAC curves. In
practice however, LRAC is shown as a smooth U-shaped curve drawn tangent to the
SRAC. This is also called an envelope curve.
REVENUES
Revenues
are the sale proceeds that accrue to a firm when it sells the goods it produces.
Total Revenue (TR):
Total
revenue (TR), average revenue (AR) and marginal revenue (MR) concepts apply in
the same way as they did to TC, AC and MC.
TR = P x Q
Average Revenue (AR)
AR = TR/Q
AR is
almost always equal to price unless the firm is engaged in price
discrimination.
Marginal Revenue (MR):
MR = ΔTR/ΔQ.
v Price-taker:
A firm
that does not have the ability to influence market price is a price-taker.
For a
price taker, AR=MR=P. In this case TR is a straight line from the
origin. The demand (or AR) curve the firm faces is a horizontal line.
Price-maker Firm:
A firm
that influences the market price by how much it produces can be called a
price-maker or price-setter.
Normal economic profit:
Economists
say that when firms earn zero accounting profits, they actually earn normal economic
profits.
Positive profits (supernormal
profits):
Positive
profits are, for this reason, called supernormal profits as they are over and
above what the owners normally require as a return for their entrepreneurship.
Profit maximization using calculus:
If total
revenue (TR) and total cost equation are given as follows:
TR = 48q – q2
TC = 12 + 16q + 3Q2
Then we
can find out the value of output at which profit is maximized as under:
Solution:
Profit
is maximized at the point where
MC = MR
MC
function can be found by taking derivative of total cost function. i.e.:
MC = d
TC / dQ
MC = 16
+ 6Q
MR
function can be found by taking derivative of total revenue (TR) function i.e.:
MR = d
TR / dQ
= 48 –
2Q
As
profit is maximized at the point where MR = MC, so by equating values of MC and
MR function, we get,
MR =MC
16 + 6Q
= 48 – 2Q
6Q + 2Q
= 48 – 16
8Q = 32
Q = 4
The
equation for total profit is,
Tñ = TR
– TC
= 48Q –
Q2 - (12 + 16Q + 3Q2)
= 48Q –
Q2 – 12 – 16Q – 3Q2
= -4Q2 + 32Q – 12
Putting
Q = 4, we get,
Tñ = -
4(4)2 + 32 (4)
– 12
= -64 + 128
- 12
Tñ = 52
So
profit is maximized where output is 4 and the maximum profit is 52.
MARKET STRUCTURES
Market
structure refers to how an industry (broadly called market) that a firm is
operating in is structured or organized.
The key ingredients of any market structure are:
• Number
of firms in the market/industry
• Extent
of barriers to entry
• Nature
of product
• Degree
of control over price.
Four broad market structures have been identified by
economists:
•
Perfect competition
•
Monopoly
•
Monopolistic competition
•
Oligopoly.
PERFECT COMPETITION
The main assumptions of perfect competition are:
Large
number of buyers and sellers, therefore firms price-takers.
No
barriers to entry (also implies free mobility of factors of production).
Identical/homogeneous
products Perfect information/knowledge
Perfect
competition can be thought of as an extreme form of capitalism, i.e. all
the firms are fully subject to the market forces of demand and supply.
Concentration ratio:
Is used
to assess the level of competition in an industry It is simply the percentage
of total industry output that is produced by the 5 largest firms in the
industry.
The Short Run and Long Run under Perfect Competition:
The
short run is the period where at least one factor of production is fixed. In
perfect competition, it also means that no new firms can enter the market. In
the long run, all the factors of production are variable.
Allocative efficiency: (the point of maximum allocative
efficiency)
The
optimal point of production for any individual firm is where
MR=MC.
The optimal point of production for any society is where price is equal to marginal
cost. This is called the point of maximum allocative efficiency
Productive efficiency:
This is
attained when firms produce at the bottom of their AC curves, that is, goods
are produced in the most cost efficient manner. Perfectly competitive firms
also achieve this in the long run because they produce at P=MC
MONOPOLY
A
situation where there is a single producer in the market.
PRICE DISCRIMINATION
Price
discrimination (PD) happens when a producer charges different prices for the
same product to different customers.
Types of Price Discrimination:
PD can
be of three types:
1st degree (everyone charged
according to what he can pay),
2nd degree (different prices charged
to customers who purchase different quantities) and
3rd degree (different prices to customers
in different markets)
MONOPOLISTIC COMPETITION
Monopolistic
competition is also characterized by a large number of buyers and sellers and absence
of entry barriers.
OLIGOPOLY
Similar
to monopoly in the sense that there are a small number of firms (about 2-20) in
the market and, as such, barriers to entry exist.
Collusion:
Collusion
occurs when two or more firms decide to cooperate with each other in the
setting of prices and/or quantities.
Cartel:
A cartel
is most likely to survive when the number of firms is small, there is openness
among firms regarding their production processes.
Break down of Collusive Oligopoly:
A
collusive oligopoly (say based on production quotas) is likely to break down
when the incentive to cheat is very high. This can arise, for instance, in a
situation where there is a lure of very high profits so that individual firms
cheat on their quota and try to increase output and profits.
Prisoner’s Dilemma Situation:
A
prisoner’s dilemma situation for oligopolistic firms arises when 2 or more
firms by attempting independently to choose the best strategy anticipation of
whatever the others are likely to do, all end up in a worse position than if
they had cooperated in the first place.
Maximin:
Maximin
strategy is a cautious (pessimistic) approach in which firms try to maximize
the worst payoff they can make.
Maximax strategies:
A
maximax strategy involves choosing the strategy which maximizes the maximum
payoff (optimistic).
Kinked Demand Curve:
A kinked
demand curve explains the “stickiness” of the prices in oligopolistic markets.
Non Price Competition:
Non
price competition means competition amongst the firms based on factors other
than price, e.g. advertising expenditures.
IMPORTANT
QUESTIONS
a)
What are the factors of productions?
b)
State the Law of DEMAND/ Supply?
c)
Law of Equi- Marginal Utility
d)
Law of Diminishing Marginal Utility
e)
Types of Elasticity
f)
Define production function.
g)
Broad market structure
h)
Solve the equation:
MC=MR
Or
Qd =Qs
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