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 Diminishing MARGINAL utility

Demand curve SLOPES downward because of the law of Diminishing marginal utility. The law of diminishing marginal utility states that with each INCREASING quantity of the COMMODITY, its marginal utility declines.

 Same

In monopoly and perfect competition, the cost curves are same. In a monopoly, the price is set above marginal cost and the FIRM earns a POSITIVE economic profit. Perfect competition PRODUCES an equilibrium in which the price and quantity of a good is economically efficient.

 1

Mr. Raees Ahamd bought 50 litres of petrol when his MONTHLY income was Rs.25000. Now his monthly income has RISEN to Rs.50,000 and he purchases 100 litres of petrol. His income ELASTICITY of demand for petrol is 1.

 Ratio between price and MARGINAL COST

According to M. Kalecki, the true MEASURE of the degree of monopoly power is the Ratio between price and marginal cost. Monopoly is the FORM of market organisation in which there is a single fir m selling a commodity for which there are no CLOSE substitutes.

 Zero

The INCOME elasticity for a HOUSEHOLD is Zero when the income of this household RISES by 5% and the demand for buttons does not CHANGE at all.

 Leftward

During a particular year, farmers experienced a DRY weather. If all the other factors remain constant, farmers supply CURVE for WHEAT will SHIFT Leftward.

 Luxury item

If the INCOME ELASTICITY is greater than one, the commodity is Luxury item. Luxury GOODS represent normal goods associated with income elasticities of DEMAND greater than one. Consumers will buy proportionately more of a particular good compared to a percentage change in their income.

 Supply

Supply is increasing FUNCTION of price. The higher the price of a good, the more a firm is willing to PRODUCE and offer, hence, the supply function is UPWARD sloping. In fact, in the perfect competition market, the supply CURVE is the marginal COST curve. Increasing production is only profitable if the good can be sold at a higher price.

 L. ROBBINS

L. Robbins defined economics: "Economics is the science which STUDIES human behaviour as a relationship between ENDS and scarce means which have alternative USES."

 Maximum

When marginal REVENUE is zero, total revenue is Maximum. The profit maximizing quantity and price can be DETERMINED by setting marginal revenue EQUAL to zero, which occurs at the maximal level of output. Marginal revenue EQUALS zero when the total revenue curve has reached its maximum VALUE.

 COLLUSIVE model

Collusive models is concerned with the maximization of JOINT PROFITS. Firms join together and work for the joint PROFIT maximization.

 Income of consumer should not CHANGE

The law of demand is based on the following assumption or conditions:
No change in consumer's income: Consumer's income must REMAIN unchanged because if income increases consumer may buy more even at a higher price invalidating the law of demand.
No change in the size and composition of population: The size of population, gender ratio and age composition are assumed to remain constant. As such changes are sure to affect demand.
No change in consumer's taste, preference, habits and fashions: If the taste changes then the consumer's preference also will change which will affect demand. When commodities go out of fashion then demand will be low even at a low price.
No expectation of future price change: The consumers do not expect any SIGNIFICANT rise or FALL in the future prices.
No change in prices of related goods: The law assumes that prices of substitutes and complementary goods remain constant.
No change in tax policy of the Government: The level of DIRECT and indirect tax imposed by the government on the income and goods should remain constant.

 The individual firm is UNABLE to AFFECT market price through its output DECISIONS

The individual firm is unable to affect market price through its output decisions best describes this smallness.

 Depreciation on machines owing to time

Depreciation on machines owing to time is CONSIDERED as fixed cost. Depreciation is a fixed cost, because it RECURS in the same amount per PERIOD throughout the useful LIFE of an asset. Depreciation cannot be considered a variable cost, since it does not vary with activity volume. However, there is an exception.

 Wheat market

Wheat market comes CLOSEST to perfect market. A perfectly competitive FIRM is called a price taker, because the pressure of competing firms forces them to ACCEPT the prevailing equilibrium price in the market. When a wheat grower wants to know what the going price of wheat is, he or she has to go to the computer or listen to the radio to CHECK.

 Quantity of the COMMODITY DEMANDED at a certain PRICE during any PARTICULAR period of TIME

Demand for a commodity refers to a quantity of the commodity demanded at a certain price during any particular period of time.

 Law of Equi-MU

Law of substitution is ANOTHER NAME for law of Law of Equi-MU. The Law of equimarginal Utility is another FUNDAMENTAL principle of ECONOMICS. This law is also known as the Law of substitution or the Law of Maximum SATISFACTION.

 Rises

POSITIVE income elasticity implies that as income rises, demand for the commodity rises. A positive income elasticity of demand is associated with normal goods; an increase in income will LEAD to a RISE in demand.

 Rs.420

The answer is Total cost for PRODUCING 5 units = 300 x 5 = 1500.
Total cost for producing 6 units = 320 x 6 = 1920 Therefore, Marginal cost for producing the 6th unit = 1920-1500 = 420.
This is a mathematical part that is used for the calculation of economics. At the same TIME, this also talks about production, and average rate of PER unit. Wlso, the marginal cost involved for the total production is also taken into account.

 TWO GOODS are IMPERFECT SUBSTITUTES

Indifference curves are CONVEX to the origin because two goods are imperfect substitutes.

 Absence of transport cost

Absence of transport cost is not an essential condition of pure COMPETITION. If the TWO CONDITIONS of pure competition are fulfilled, there can be no question of monopolistic control. In perfect competition, apart from the absence of monopoly, some other conditions are also essential, e.g., free entry and EXIT, the absence of transport cost, perfect knowledge.

 Consumer's surplus

In economics, what a consumer is ready to pay MINUS what he actually pays, is TERMED as Consumer's surplus. Consumer surplus is DEFINED as the difference between the consumers' WILLINGNESS to pay for a COMMODITY and the actual price paid by them, or the equilibrium price.

 Excess CAPACITY always EXISTS

In IMPERFECT COMPETITION excess capacity always exists. Excess capacity is a characteristic of natural monopoly or MONOPOLISTIC competition.

 Structural

Unemployment due to mechanization of agriculture is Structural. Due to structural CHANGES in the economy, structural unemployment may take place. Structural unemployment is CAUSED by a decline in demand for PRODUCTION in a particular industry, and consequent DISINVESTMENT and reduction in its manpower requirements.

 a' and 'C' both

Mobility of LABOUR Increases EFFICIENCY of labour and also increases DIVISION of labour.

 HAMMER

Hammer is a PRODUCER GOOD. A hammer is a DURABLE RIVAL good.

 The Making of Index numbers

The Making of Index numbers is the work of Irving Fisher. Index numbers played an important role in his monetary theory, and his BOOK The Making of Index Numbers has remained INFLUENTIAL down to the present day. Fisher's main intellectual RIVAL was the SWEDISH economist Knut Wicksell.

 Downward to the right

An ISO-product SLOPES downward to the right. They slope downward because MTRS of labour for capital DIMINISHES. When we increase labour, we have to decrease capital to produce a GIVEN LEVEL of output.

 Negative

In CASE of inferior goods, the income ELASTICITY 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.

 Equal

A consumer is in equilibrium when MARGINAL utilities are equal. A consumer is in equilibrium when he derives maximum SATISFACTION from the goods and is in no position to rearrange his PURCHASES.

 QUANTITY of any one factor is FIXED

During short PERIOD, diminishing returns MAY follow because quantity of any one factor is fixed.

 National Development Council

National Development Council FINALIZES the FIVE YEAR Plan Proposals.

 It is MINIMUM acceptable to the PRODUCER

NORMAL profit is called normal because It is minimum acceptable to the producer. Normal profit is a SITUATION where a firm makes sufficient revenue to cover its TOTAL costs and remain competitive in an industry.

 RISE in supply

When supply of a COMMODITY INCREASES without change in price, it is called rise in supply.

 PRICE of product

Price of product is not a cause of shift in cost curves of a firm. Cost curves shift in RESPONSE to changes in two factors: If a TECHNOLOGICAL change results in the firm using more capital, the average fixed cost curve SHIFTS upward and at low levels of output, the average total cost curve may shift upward. At LARGE output levels, average total cost decreases.

 The good is a substitute

When cross elasticity of DEMAND is a LARGE positive number, one can conclude that the good is complement. Two GOODS that complement each other have a negative cross elasticity of demand: as the price of good Y RISES, the demand for good X FALLS.

 Elastic

If price changes by 1% and supply changes by 2%, then supply is Elastic. The Price ELASTICITY of Supply (PES) for elastic and inelastic supply WOULD be different. The PES for elastic supply would be greater than 1. This tells US that if prices were to increase (or decrease) by 1%, the quantity SUPPLIED would increase (or decrease) in a number greater than 1%.

 Oligopoly

Oligopoly FORM of market structure is characterised by interdependence in decision-making as between the different competing firms. An oligopoly is a market form WHEREIN a market or industry is dominated by a small number of large sellers (oligopolists). Oligopolies can result from various forms of COLLUSION which reduce competition and lead to HIGHER prices for CONSUMERS. Oligopolies have their own market structure.

 PRICE RIGIDITY

In the CONTEXT of oligopoly, the kinked demand curve hypothesis is designed to explain Price rigidity. The curve is more elastic above the kink and less elastic below it. This means that the RESPONSE to a price increase is less than the response to a price decrease.

 Observed BEHAVIOR of the consumer

The Revealed PREFERENCE THEORY deduces the inverse price-quantity relationship from observed behavior of the consumer. Revealed preference theory asserts that the BEST way to MEASURE consumer preferences is to observe their purchasing behavior.

 PRODUCTION

 Not all WANTS can be SATISFIED

Resource scarcity for the SATISFACTION of wants implicates that not all wants can be satisfied. The CLASSIFICATION of human wants is not a RIGID concept.

 ATC

Unit COST is ANOTHER NAME for ATC. Average TOTAL cost (ATC): the per-unit cost of output.

 LUXURY ITEM

If income elasticity for a good is 2, then it is a Luxury item. A positive income elasticity of demand is associated with normal GOODS; an INCREASE in income will lead to a rise in demand.

 All of the above

Profits are lower in the LONG RUN than in the short run, it can be negative and are LESS in PERFECT competition than in monopoly.

 Infinite

The HORIZONTAL demand curve PARALLEL to x-axis implies that the ELASTICITY of demand is infinite.It is ZERO when the demand curve is parallel to the y-axis.

 Velocity of money

Number of times a unit of money CHANGES HANDS in the course of a year is CALLED Velocity of money. The velocity of money is the number of times a unit of money changes hands during EXCHANGES in a year.

 Satisfaction

Utility is more CLOSELY related to the TERM Satisfaction. The term was introduced initially as a measure of pleasure or satisfaction WITHIN the theory of utilitarianism by moral philosophers such as JEREMY BENTHAM and John Stuart Mill.

 All of the above

A competitive firm maximizes PROFIT at the OUTPUT LEVEL where Price equals marginal cost, The SLOPE of the firm's profit function is equal to zero and Marginal revenue equals marginal cost.

 INTERSECT each other

Iso-product CURVES DOESNOT intersect each other.