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 Production

The transformation of resources into ECONOMIC GOODS and services is called Production. Production is the method of TURNING raw materials or inputs into finished goods or products in a MANUFACTURING process.

 NEGATIVE

In the case of an inferior good, the income elasticity of demand is Negative. A negative income elasticity of demand is associated with inferior goods; an increase in income will lead to a FALL in the demand and may lead to changes to more luxurious SUBSTITUTES.

 Enters into the PRICE of his product

As for the cost of PRODUCTION of an individual farmer, the RENT paid by him enters into the price of his product. The classical political economists found value to be DETERMINED in production; since most of the cost of production could be reduced to labor, this approach was refined into the Labor Theory of Value.

 Infinite

A horizontal supply curve parallel to the quantity axis implies that the elasticity of supply is Infinite. The horizontal supply curve SHOWS ANOTHER EXTREME case, i.e., that of perfectly inelastic supply. The IMPLICATION of such a supply curve is that a little price cut will cause the quantity supplied to fall to zero while a slightest INCREASE in price will induce purchasers to offer an infinitely large quantity.

 Different ELASTICITY of DEMAND

Discriminating monopoly is possible if TWO markets have different elasticity of demand. Price discrimination is possible only when the BUYERS from different sub-markets are willing to purchase the same product at different prices. If the elasticity of demand is the same, then the effect of the price change on the buyer will be identical too.

 280

Total costs (TC) = FC + TVC. Average Fixed Costs (AFC) = FC/Q. TC = 400+1000 = 1400. AFC = 1400/5 = 280.

 David Ricardo

"The REAL price of everything, what every thing really COSTS to the MAN who wants to REQUIRE it, is the toil and TROUBLE of acquiring it. David Ricardo made this statement.

 Employee' wages

In the FORM of Employee' wages, the largest PERCENTAGE of national INCOME is earned.

 All KINDS of market SITUATIONS

Law of RETURN applies to firms working in all kinds of market situations. A firm's production function could exhibit different types of RETURNS to SCALE in different ranges of output.

 Internal and external

Economies of scale are of two kinds Internal and external. Internal economies of scale are FIRM-specific or caused INTERNALLY while external economies of scale occur based on LARGER changes outside the firm. Both result in declining marginal costs of production, yet the net EFFECT is the same.

 ROUND CURVE

Round curve is not the NAME of LAC curve.

 Positive and greater than 1

If a good is a LUXURY, its INCOME elasticity of demand is Positive and greater than 1. If income elasticity of demand of a COMMODITY is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good.

 All of the above

CREDIT CREATION power of the COMMERCIAL banks gets limited by Banking habits of the people, Cash Reserve Ratio and Credit policy of the central BANK.

 Both B and C will INCREASE

If the PRICE of good A increases relative to the price of SUBSTITUTES B and C, the DEMAND for Both B and C will increase.

 AC = AR

When AC = AR, we KNOW that the FIRMS are earning just normal PROFITS.

 Rectangular HYPERBOLA

Rectangular hyperbola is the SHAPE of the average fixed COST (AFC) curve. The AFC curve is a rectangular hyperbola in the SENSE that all rectangles FORMED by AFC are of equal sizes.

 Unitarily ELASTIC demand

If the price of 'X' rises by 10 percent and the QUANTITY demanded falls by 10 percent, 'X' has Unitarily elastic demand.

 Rising opportunity cost between two goods

The shape of PPC is concave due to rising opportunity cost between two goods. Most of the PPF curves are concave due to the inadaptability of the resources. The LAW of increasing opportunity cost states: as the PRODUCTION of one GOOD rises, the opportunity cost of PRODUCING that good increases.

 Does not start from ORIGIN

TC curve does not start from origin. The shape of the total cost curve is BASED on short-run production returns, especially the law of diminishing MARGINAL returns. Another observation is that the total cost curve does not GO through the origin, but rather begins at a positive value on the vertical AXIS. This vertical intercept indicates fixed cost.

 MRP = VMP

Under conditions of perfect competition in the product MARKET MRP = VMP. Under the ASSUMPTION of perfect competition a firm employs a FACTOR up to that number at which the PRICE of the factor is just equal to the VALUE of the marginal product (=MRP of the factor).

 25% decrease in QUANTITY demanded

If DEMAND is unitary elastic, a 25% increase in PRICE will RESULT in 25% decrease in quantity demanded.

 Opportunity cost

The cost on one THING in terms of the alternative given up is known as Opportunity cost. Opportunity cost is an economics term that refers to the VALUE of what you have to GIVE up in ORDER to choose something ELSE.

 An INCREASE in total revenue

When DEMAND is PERFECTLY inelastic, an increase in price will RESULT in an increase in total revenue.

 Price

Elasticity of supply refers to the degree of responsiveness of supply of a commodity to changes in its Price. Elasticity of supply measures the degree of responsiveness of quantity SUPPLIED to a CHANGE in own price of the commodity. It is also DEFINED as the PERCENTAGE change in quantity supplied divided by percentage change in price.

 David RICARDO

David Ricardo stated EXPLICITLY for the FIRST time, the Law of Comparative Costs. Absolute ADVANTAGE REFERS to the uncontested superiority of a country to produce a particular good better. Comparative advantage introduces opportunity cost as a factor for analysis in choosing between different options for production.

 GREATER than unity

The ELASTICITY of demand of durable GOODS is greater than unity. Price elasticity of demand for durable goods is generally more elastic in short run than in LONG run. That is, quantity demanded is more sensitive to price changes of such durable goods in short run and not so much in the long run.

 Supply decreases and demand increases

When EQUILIBRIUM price rises but equilibrium QUANTITY REMAINS unchanged, the cause is supply decreases and demand increases. As price increases, it serves as an incentive for suppliers to increase supply and also leads to a fall in demand. It is important to realize that these processes continue to operate until a new equilibrium is ESTABLISHED.

 All of the above

Microeconomics DEALS with the Allocation of RESOURCES of the economy as between production of different goods and services, DETERMINATION of PRICES of goods and services and Behavior of industrial DECISION makers.

 Marshall

Marshall DESCRIBED economics as a science of material welfare. Marshall's view is that economics STUDIES all the actions that people take in ORDER to achieve economic welfare. In the words of Marshall, "man earns MONEY to get material welfare."

 Infinity

The elasticity of substitution between two PERFECT substitutions is Infinity. Elasticity of factor substitution can TAKE any value from zero to infinity, ALWAYS being POSITIVE.

 how SOCIETY manages its SCARCE RESOURCES

Economics is the study of how society manages its scarce resources. Resources are scarce in that we have fewer resources than we WISH. Economists study how PEOPLE make decisions about buying and selling, and saving and investing.

 Variable cost

Variable cost increases CONTINUOUSLY with the increase in production. Variable cost varies at different LEVEL of output, this implies that when the output of a particular firm is at ZERO, the variable cost will be zero and when there is increase in production of output, there will ALSO be a corresponding increase in the variable cost.

 1867

The FIRST of three volumes of Das KAPITAL was PUBLISHED on 14 SEPTEMBER 1867, dedicated to Wilhelm Wolff and was the sole volume published in Marx's lifetime.

 a' and 'C' both

Unemployment of LABOUR means that a worker does not GET FULL time JOB and a person does not get job according to his qualification.

 PART of total COST

Normal profit is Part of total cost. Normal profit is an economic term that describes when a company's total REVENUES are equal to its total COSTS in a perfectly competitive market.

 LABOUR

The HUMAN effort APPLIED to the production of GOODS is called Labour in economics. LABOR is the human effort that can be applied to the production of goods and services.

 AFC

The shape of RECTANGULAR HYPERBOLA is made by AFC. The AFC curve is a rectangular hyperbola in the sense that all rectangles FORMED by AFC are of EQUAL sizes.

 GUSTAV Cassel

The Purchasing Power PARITY Theory' CAME into PROMINENCE in 1916 through the writings of Gustav Cassel.

 DAVID Ricardo

David Ricardo the economist had little formal EDUCATION and started working in the money MARKET at an EARLY age of fourteen. At the age of 14 he entered into business with his father, who had made a fortune on the London Stock Exchange.

 Perfect competition

Agricultural goods market DEPICTS characteristics close to Perfect competition. A PERFECTLY competitive market has the following characteristics: There are many buyers and SELLERS in the market. Each COMPANY makes a similar product. Buyers and sellers have access to perfect information about price.

 MC curve initially falls and then rises

As OUTPUT increases when MC curve initially falls and then rises. The Marginal Cost curve is U shaped because initially when a firm increases its output, total costs, as well as variable costs, start to increase at a diminishing RATE. Then as output rises, the marginal cost increases.

 HUMAN skills are a labour INPUT

Human skills are a labour input is correct with respect to resources. The human or the interpersonal skills are the skills that present the managers' ABILITY to interact, WORK or relate effectively with people. These skills enable the managers to make use of human potential in the COMPANY and motivate the employees for better results.

 Straight line

In the case of TWO perfect SUBSTITUTES, the indifference curve will be Straight line. This is because perfect substitutes have a fixed ratio of SUBSTITUTION. An indifference curve is usually concave towards the origin because the two goods are usually not perfect substitutes. This means that the exchange rate varies HENCE the slope of the line tangent to the curve (exchange rate) varies.

 Greater than Zero but less than One

If lowering of fares REDUCES railway's REVENUES and increasing of fares increases, then the demand for RAIL TRAVEL has a price ELASTICITY of Greater than Zero but less than One.

 Real WAGES

The amount of goods and services which the LABOURER ACTUALLY gets is called his real wages. The standard of living and the PROSPERITY of a labourer depend not on his money wages but on his real wages.

 An INCOME elasticity of demand between zero and 1

A NECESSITY is defined as a good having an income elasticity of demand between zero and 1. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is GREATER than 1, it is a luxury good or a superior good. A zero income elasticity of demand OCCURS when an increase in income is not associated with a change in the demand of a good.

 QUANTITY supplied

All of the following are determinants of demand except Quantity supplied. The Five Determinants of Demand PRICES of related goods or services. These are either complementary, those purchased ALONG with a particular good or service, or substitutes, those purchased INSTEAD of a CERTAIN good or service. Tastes or preferences of consumers. Expectations.

 Perfect COMPLEMENTARY GOODS

If TWO goods are perfect complements then the INDIFFERENCE CURVES will be L-shaped.

 All of the above

Effective demand DEPENDS UPON DESIRE for the commodity, MEANS to purchase and Willingness to USE those means for that purchase.

 All of the above

Economic problems ARISE because WANTS are unlimited, Resources are scarce and SCARE resources have ALTERNATIVE USES.