If the price of a substitute Y of good X increases, what impact does it have on the equilibrium price and quantity of good X?
X and Y being substitute goods, if the price of Y increases, then it will reduce the demand for Y and people will switch to X, which will raise the demand for X. thus, the demand curve will shift from D1D1 to D2D2. At the existing price P1 there will be an excees demand. Due to the pressure of excees demand the existing price will increase. Consequently, the new equilibrium occurs at E2 where the new demand curve D2D2 intersects the supply curve S1S1. The
new equilibrium price is P2 which is higher than P1 and equilibrium quantity is q2 which is higher than q1. Therefore due to the increase in the price of substitute good Y the equilibrium price of X will rise and equilibrium output of X will also be higher.
How will a change in the price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity also through a diagram.
Suppose the price at which the equilibrium is attained in exercise 5 is above the minimum average cost of the firms constituting the market. Now if we allow for free entry and exit of firms, how will the market price adjust to it?
When do we say that there is an excess demand for a commodity in the market?
Suppose the market determined rent for apartments is too high for common people to afford. If the government comes forward to help those seeking apartments on rent by imposing control on rent, what impact will it have on the market for apartments?
Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity.
When do we say that there is an excess supply for a commodity in the market?
How are equilibrium price and quantity affected when income of the consumers
a) Increase
b) Decrease
Explain market equilibrium.
In what respect do the supply and demand curves in the labor market differ from those in the goods market?
Explain how price is determined in a perfectly competitive market with a fixed number of firms.
Explain the concept of a production function
What would be the shape of the demand curve so that the total revenue curve is?
(a) A positively sloped straight line passing through the origin?
(b) A horizontal line?
Discuss the central problems of an economy.
What are the characteristics of a perfectly competitive market?
What do you mean by the budget set of a consumer?
What is the total product of input?
From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
Quantity |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
Marginal Revenue |
10 |
6 |
2 |
2 |
2 |
0 |
0 |
0 |
- |
What do you mean by the production possibilities of an economy?
How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?
What is budget line?
How does an increase in the price of an input affect the supply curve of a firm?
Comment on the shape of MR curve in case when TR curve is a
(a) Positively sloped straight line
(b) Horizontal straight line
The market price of a good changes from Rs 5 to Rs 20. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm’s supply curve is 0.5. Find the initial and final output levels of the firm.
A firm earns a revenue of Rs 50 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns a revenue of Rs 150. What is the price elasticity of the firm’s supply curve?
The following table shows the total cost schedule of a firm. What is the total fixed cost schedule of this firm? Calculate the TVC, AFC, AVC, SAC and SMC schedules of the firm.
What do you mean by an ‘inferior good’? Give some examples
A consumer wants to consume two goods. The prices of the two goods are Rs 4
and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of the budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire
income on that good?
(iii) How much of good 2 can she consume if she spends her entire income on
that good?
(iv) What is the slope of the budget line?
Questions 5, 6 and 7 are related to question 4.
What is the total product of input?
What is the relation between market price and average revenue of a price-taking firm?
At the market price of Rs 10, a firm supplies 4 units of output. The market price increases to Rs 30. The price elasticity of the firm’s supply is 1.25. What quantity will the firm supply at the new price?