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 Less elastic

In May 2013, firm was supplying 500kg of SUGAR at MARKET price of Rs.30/- per kg. During June 2013, firm's supply of sugar had decreased to 450kg at price of Rs.20/- per kg. These CHANGES SHOW that supply of sugar is less elastic.

 Marginal cost CURVE

In perfect competition, the firm's Marginal cost curve above AVC has the IDENTICAL shape of the firm's supply curve. Under perfect competition average revenue is equal to marginal revenue, so the firm will produce up to that point where marginal revenue and marginal cost are equal. Short run supply curve of a PERFECTLY COMPETITIVE firm is that portion of marginal cost curve which is above average variable cost curve.

 Less supply than demand

Scarcity means Less supply than demand. Scarcity refers to the basic economic problem, the GAP between limited – that is, scarce – resources and THEORETICALLY limitless wants. This situation REQUIRES people to make decisions about how to ALLOCATE resources efficiently, in order to satisfy basic needs and as many additional wants as possible.

 TOTAL revenue minus total cost

Economic PROFIT is Total revenue minus total cost. Economic profit is the monetary costs and opportunity costs a firm PAYS and the revenue a firm receives. Economic profit = total revenue – (explicit costs + IMPLICIT costs).

 AVERAGE VARIABLE COST equals price at the profit-maximizing LEVEL of output

A firm ENCOUNTERS its 'shutdown point' when average variable cost equals price at the profit-maximizing level of output.

 Cardinal concept

Under Marginal utility analysis, utility is assumed to be a Cardinal concept. The Cardinal Utility APPROACH is propounded by neo-classical economists, who believe that utility is MEASURABLE, and the CUSTOMER can express his SATISFACTION in cardinal or QUANTITATIVE numbers, such as 1,2,3, and so on.

 A higher level of SATISFACTION

A higher indifference curve SHOWS a higher level of satisfaction. A higher indifference curve will represent a higher level of satisfaction than a lower indifference curve. In other WORDS, the combinations which lie on a higher indifference curve will be PREFERRED to the combinations which lie on a lower indifference curve.

 Different

Price DISCRIMINATION will be profitable only if the ELASTICITY of demand in different MARKETS into which the TOTAL market has been DIVIDED is different.

 NEGATIVE

For INFERIOR commodities, income effect is Negative. When PRICE of an inferior good FALLS, its negative income effect will tend to REDUCE the quantity purchased, while the substitution effect will tend to increase the quantity purchased.

 1758

Elinor OSTROM and Oliver Williamson are the Nobel Prize LAUREATES in Economics in 2009. In the YEAR 1758, Francois Quesnay's Tableu Economique was PUBLISHED.

 Marginal COST and the price

The degree of MONOPOLY power is measured in terms of difference between Marginal cost and the price. In a perfectly competitive MARKET, price equals marginal cost and firms earn an ECONOMIC profit of zero. In a monopoly, the price is set above marginal cost and the firm EARNS a positive economic profit.

 May earn normal profit, super normal profit or incur losses

In short RUN, a firm in monopolistic competition may earn normal profit, super normal profit or incur losses. In the short run, a MONOPOLISTICALLY COMPETITIVE firm maximizes profit or minimizes losses by producing that quantity that corresponds to when marginal revenue = marginal cost. If average TOTAL cost is below the market price, then the firm will earn an economic profit.

 The price of the COMMODITY under consideration

Only price changes and all others like price of related GOODS, income, taste and preference remain constant, while drawing an INDIVIDUAL's DEMAND curve for a commodity.

 Geometric mean of LASPEYRE's and PAASCHE's index

Fisher's Ideal VOLUME index is the geometric mean of the Laspeyres and Paasche volume indices. A measure of change in volume from period to period. It is CALCULATED as the geometric mean of a chain Paasche volume index and a chain Laspeyres volume index.

 AVC and AC

MC CURVE CUTS AVC and AC curves at their minimum points. As long as MC is less than ATC, ATC will go down with each extra unit made. At some POINT, MC rises to the point that it equals ATC and the curves intersect.

 SLOPE of TC

MC is GIVEN by Slope of TC. Slope tells us how (TOTAL) COSTS change when we change output/quantity PRODUCED.

 Bank rate

Bank rate is the official minimum rate at which the Central Bank of a country is prepared to rediscount approved BILLS HELD by the COMMERCIAL BANKS.

 Differentiated product

The MAJOR difference between PERFECT competition and monopolistic competition is differentiated product. Product DIFFERENTIATION (or simply differentiation) is the process of distinguishing a product or service from others, to make it more ATTRACTIVE to a particular target market. This involves differentiating it from COMPETITORS' products as well as a firm's own products.

 Blocked ENTRY

In long RUN EQUILIBRIUM, the pure monopolist can make pure profits because of blocked entry. BARRIERS may block entry even if the firm or FIRMS currently in the market are earning profits.

 Requires that at LEAST ONE input is fixed

The SHORT run Requires that at least one input is fixed. The short run is a concept that states that, within a certain period in the future, at least one input is fixed while OTHERS are VARIABLE.

 All of the above

The average cost is U-shaped because an increase in output increases the RETURNS and reduces the total cost. As the curve CONTINUES to slope downwards, it enters a phase of constant returns where the returns and output are at their optimum level. After the constant level, continued increase in output STOPS yielding any further INCREMENTS in the returns (diminishing returns) and the costs begin to rise, forcing the curve to START sloping upwards.

 CAPITAL GOODS

Lesser production of Capital goods would LEAD to lesser production in future. Production of both capital and consumer goods is essential for the economy. Capital goods (like plant and machinery) are needed for further production and future growth. Consumer goods are needed for present CONSUMPTION.

 PERIOD long enough to allow FIRMS to change plant size and CAPACITY

The period is long enough to allow firms to change plant size and capacity. The long run is a period of TIME in which all factors of PRODUCTION and costs are variable. In the long run, firms are able to adjust all costs.

 MC=MR

The necessary condition for equilibrium position of a firm is MC=MR. A firm is in equilibrium when it has no tendency to change its level of output. It NEEDS neither expansion nor contraction. It wants to EARN MAXIMUM profits in by equating its marginal cost with its marginal revenue, i.e. MC = MR.

 a' and 'B' both

Land only Is a free GIFT of nature and it lacks geographical MOBILITY.

 LARGER

Other things EQUAL, if a good has more SUBSTITUTES, its price ELASTICITY of demand is larger.

 AR=MR

Under perfect competition AR=MR. If the market price is unaffected by VARIATIONS in the firm's OUTPUT, then the firm's demand curve, its AR curve and MR curve will COINCIDE in the same horizontal line.

 Any of the factors of PRODUCTION

Economic RENT can accrue to any of the factors of production. Economic rent is any payment to an owner or factor of production in excess of the costs needed to BRING that factor into production.

 AMOUNT of the commodity offered for sale at a PARTICULAR PRICE per unit of time

The supply of a commodity refers to amount of the commodity offered for sale at a particular price per unit of time. Price of a commodity is DETERMINED by the DEMAND for and supply of a commodity.

 All of the above

The IC CURVE APPROACH assumes Rationality, CONSISTENCY and Transitivity.

 Rational

The economic ANALYSIS expects the CONSUMER to BEHAVE in a manner which is Rational. The assumption of rational BEHAVIOR implies that people would rather be better off than worse off. Most conventional economic theories are based on the assumption that all individuals TAKING part in an action or activity are behaving rationally.

 All of the above

Risks in the business arise because of Introduction of the NEW products, Uncertain POLICY of rival firms and CHANGES in tastes.

 DEPRECIATION

The capital that is consumed by an economy or a firm in the production process is KNOWN as Depreciation. In economics, depreciation is the GRADUAL DECREASE in the economic value of the capital stock of a firm, nation or other entity, either through physical depreciation, obsolescence or changes in the demand for the services of the capital in question.

 Production indifference CURVE

Some ECONOMISTS refer to iso-product CURVES as Production indifference curve. A given QUANTITY of output may be produced with DIFFERENT combinations of factors. Iso-quant curves are also known as Equal-product or Iso-product or Production Indifference curves.

 Law of DEMAND

Diminishing marginal UTILITY is the basis of Law of demand. When the price of a goods falls, downward sloping marginal utility CURVE implies that the consumers MUST buy more of the good so that its marginal utility falls and becomes equal to the new price.

 TFC

If a firm shuts down temporarily, it will incur loss equal to TFC. The intersection of the average variable cost CURVE and the marginal cost curve, which shows the price where the firm would lack enough revenue to cover its variable costs, is CALLED the shutdown point. If the perfectly competitive firm can CHARGE a price above the shutdown point, then the firm is at least covering its average variable costs. It is also making enough revenue to cover at least a portion of fixed costs, so it should LIMP ahead even if it is making losses in the short RUN, since at least those losses will be smaller than if the firm shuts down immediately and incurs a loss equal to total fixed costs.

 An individual firm can influence the PRICE

An individual firm can influence the price is not a characteristic of perfect COMPETITION. All goods in a perfectly COMPETITIVE market are considered perfect SUBSTITUTES, and the DEMAND curve is perfectly elastic for each of the small, individual firms that participate in the market. These firms are price takers–if one firm tries to raise its price, there would be no demand for that firm's product.

 HABERLER

Haberler propounded the opportunity cost theory of international trade. Gottfried Haberler has attempted to restate the comparative costs in terms of opportunity cost. He DEMONSTRATES that the doctrine of comparative costs can hold VALID even if the labour theory of value is discarded. The theory determines the cost of producing a commodity in terms of the ALTERNATIVE production that has to be foregone for producing the commodity in question.

 Increases

When Marginal Utility is POSITIVE, TOTAL Utility Decreases. When we say that the total utility is increasing at a diminishing RATE, we mean that amount of CHANGE in total utility is decreasing with the consumption of every EXTRA unit which is nothing but marginal utility.

 Economic profit will be less than accounting profit

If there are implicit costs of production Economic profit will be less than accounting profit. Economic profit is total revenue MINUS opportunity cost. Accounting profit is total revenue minus EXPLICIT cost. Opportunity costs are HIGHER than explicit costs because opportunity costs ALSO include implicit costs.

 All of the above

Scarcity of RESOURCES, Alternative uses and Unlimited wants are the CAUSE of an economic problem. Factors like production costs and labor affect the COST of scarce items. If the unlimited wants and NEEDS of a particular good can be met by resources, then it is not considered scarce. This would require the resources to be unlimited as well for it to MEET unlimited demand.

 Tea and COFFEE

Tea and coffee PAIRS of commodities is an EXAMPLE of substitutes. This is a negative relationship, as is true for all pairs of GOODS that are complements.

 LARGE NUMBER of SUBSTITUTES

Large number of substitutes keeps the price-elasticity of demand for a good HIGH.

 Monopoly

In Monopoly market structure the degree of control over the price of its product by a FIRM very large. In a monopoly type of market structure, there is only ONE SELLER, so a single firm will control the ENTIRE market. It can set any price it wishes since it has all the market power.

 All PRODUCING sectors of the ECONOMY

Demand for intermediate consumption arises in all producing sectors of the economy. Intermediate consumption is a national accounts concept which MEASURES the value of the goods and services consumed as inputs by a process of PRODUCTION.

 Variable cost

Excise tax is a part of Variable cost. Excise DUTY is an indirect tax. That means the tax amount is included as part of the selling PRICE. Excise duty, also known as excise tax, is ultimately passed on and paid by the consumer when he MAKES a PURCHASE.

 a' and 'c' both

Economic development of a COUNTRY requires SKILLED labour and Abundant NATURAL RESOURCES.

 All of the above

When the perfectly COMPETITIVE firm and INDUSTRY are in long RUN equilibrium, then P = MR = SAC = LAC,
D = MR = SMC = LMC and,
P = MR = LOWEST point on the LAC curve.

 Substitution EFFECT plus income effect

The total effect of a price CHANGE of a commodity is substitution effect plus income effect. The income effect is the change in consumption patterns due to a change in purchasing power. This occurs with income increases, price changes, and even currency fluctuations. SINCE income is not a good in and of itself (it can only be exchanged for GOODS and services), price DECREASES increase purchasing power.

 Varies inversely with price

In a TYPICAL demand SCHEDULE, quantity DEMANDED varies inversely with price. The law of demand states that a higher price typically LEADS to a LOWER quantity demanded.