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 Price will RISE

In MARKET equilibrium, supply is VERTICAL line. The DOWNWARD SLOPING demand curve shifts to the right, then Price will rise.

 Opportunity COST

The cost of one thing in terms of the ALTERNATIVE given up is called 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.

 Quantity of the GOOD offered for sale at a particular PRICE per unit of time

The SUPPLY of a good refers to quantity of the good offered for sale at a particular price per unit of time. The TERM supply refers to the ENTIRE relationship between the quantity supplied and the price of a good.

 Interest on owned money capital

Interest on owned money capital is an implicit cost of production. The COSTS in which there is no CASH OUTLAY, is KNOWN as Implicit Cost.

 MARGINAL productivity

The producer's demand for a factor of production is governed by the marginal productivity of the factor.

 ADAM Smith

Adam Smith is generally REGARDED as the FOUNDER of the 'Classical SCHOOL'.

 The total is decreasing

When marginal is NEGATIVE, it must be true that the total is decreasing. Marginal utility MAY decrease into negative utility, as it may become ENTIRELY unfavorable to consume ANOTHER UNIT of any product.

 AR=MR

In MONOPOLY at VARIOUS OUTPUT LEVELS AR=MR.

 MAXIMUM

Marginal UTILITY is EQUAL to AVERAGE utility at that TIME when average utility is maximum.

 EQUAL to 1

A significant property of the Cobb-Douglas PRODUCTION function is that the ELASTICITY of SUBSTITUTION between inputs is Equal to 1.

 How to maximize private profit

How to maximize private profit is not a CENTRAL PROBLEM of an economy. Some of the central problems that are faced by every economy of a country are as FOLLOWS: Production, distribution and disposition of goods and services are the BASIC economic activities of life. In the course of these activities, every SOCIETY has to face scarcity of resources.

 DOWNWARD to the right

An isoquant slopes downward to the right. This implies that the Isoquant is a NEGATIVELY sloped curve. This is because when the QUANTIFY of factor K (capital) is increased, the QUANTITY of L (labor) must be reduced so as to keep the same level of output.

 David RICARDO

The Principles of Political ECONOMY and Taxation (19 APRIL 1817) is a book by David Ricardo on economics. Ricardo claims in the PREFACE that Turgot, Stuart, Adam Smith, Jean-Baptiste Say, Sismondi, and others had not written enough "satisfactory information" on the topics of rent, profit, and wages.

 Marginal revenue is always less than average revenue

In CASE of monopoly, Marginal revenue is always less than average revenue. A monopolist's marginal revenue is always less than or EQUAL to the price of the GOOD. Marginal revenue is the amount of revenue the firm RECEIVES for each additional unit of output.

 A new technique makes it cheaper to PRODUCE the GOOD

A new technique makes it cheaper to produce the good best EXPLAINS a shift in market supply curve to the right. A rightward shift in the supply curve, say from a new production technology, leads to a lower equilibrium price and a greater QUANTITY.

 Perfect competition

Excess CAPACITY is not found under Perfect competition. Under perfect competition, each firm PRODUCES at the MINIMUM point on its LAC curve and its horizontal demand curve is tangent to it at that point. Its OUTPUT is ideal and there is no excess capacity in the long-run.

 Giffen goods

Price and demand are POSITIVELY correlated in case of Giffen goods. A Giffen GOOD is a product for which demand increases as the price increases and FALLS when the price decreases.

 There is a fixed FACTOR and a variable factor

The law of variable proportions come into being when there is a fixed factor and a variable factor. The law of variable proportions states that as the QUANTITY of one factor is increased, keeping the other FACTORS fixed, the MARGINAL PRODUCT of that factor will eventually decline.

 Value in USE

Total utility of a COMMODITY is MEASURED by value in use PRICE of that commodity. The utility theory of value was the belief that price and value were solely based on how much “use” an individual received from a commodity.

 All of the above

An INDIVIDUAL DEMAND CURVE slopes downward to the right because of the WORKING of the law of diminishing marginal utility, Substitution effect of decrease in price and INCOME effect of fall in price.

 NONE of the above

Microeconomics is PRIMARILY CONCERNED with the FACTORS that AFFECT individual economic choices, the effect of changes in these factors on the individual decision makers, how their choices are coordinated by markets, and how prices and demand are determined in individual markets.

 Flow concept

Supply of a COMMODITY is a flow concept. the commodity which the SELLERS or PRODUCERS are able and willing to offer for sale at a particular price, during a certain period of TIME.

 AFC

All the following CURVES are U-shaped EXCEPT AFC. The AFC curve is a rectangular hyperbola in the SENSE that all rectangles formed by AFC are of equal sizes. The AFC curve is asymptotic to both the axes. This means that it TOUCHES neither the HORIZONTAL axis nor the vertical axis.

 Both A and B are correct

The economist's objections to monopoly REST on the FOLLOWING grounds that there is a transfer of income from CONSUMERS to the MONOPOLIST and there is WELFARE loss as resources tend to be misallocated under monopoly.

 Average FIXED cost CURVE

Average fixed cost curve is never U-shaped. The average fixed costs AFC curve is downward sloping because fixed costs are distributed over a larger volume when the quantity PRODUCED INCREASES.

 FLATTER in long run

Supply curve is Flatter in long run. All firms have identical cost conditions. Hence, in the case of a constant cost INDUSTRY, the long-run supply curve LSC is a horizontal STRAIGHT line (i.e., perfectly elastic) at the price OP, which is equal to the minimum average cost. This means that whatever the OUTPUT supplied, the price would REMAIN the same.

 MC=MR

MC=MR is the first-order condition for the profit of a firm to be maximum. The Profit Maximization RULE states that if a firm chooses to maximize its profits, it MUST choose that level of output where Marginal COST (MC) is equal to Marginal REVENUE (MR) and the Marginal Cost curve is rising. In other words, it must produce at a level where MC = MR.

 Inelastic

Union LEADERS are in BETTER position to BARGAIN for higher wages if demand for LABOUR is Inelastic. The capacity of trade unions to raise wages in a particular INDUSTRY depends on the elasticity of demand for labour.

 Additional

The term 'marginal' in economics MEANS Additional. In economics, the term marginal is used to INDICATE the change in some benefit or cost. when an additional unit is PRODUCED. For INSTANCE, the marginal revenue is the change in. total revenue when an additional unit is produced.

 Upward to the right

In the CASE of a Giffen good, the demand CURVE will be Upward to the right. A Giffen good has an upward-sloping demand curve, which is contrary to the FUNDAMENTAL law of demand, which STATES that the quantity demanded for a product FALLS as the price increases, resulting in a downward slope for the demand curve.

 Capital is SCARCE

Interest is PAID because Capital is scarce. The BORROWER can get additional income from borrowed capital and in EASILY afford to pay interest. Hence it is scarcity.

 1

In the case of a straight-LINE DEMAND curve MEETING the two axes, the price-elasticity of demand at the mid-point of the line would be 1.

 QUANTITY will DECREASE

We can CONCLUDE with CERTAINTTY that the EQUILIBRIUM quantity will decrease.

 Cost of raw material

Total costs in the short-term are CLASSIFIED into fixed costs and VARIABLE costs. Cost of raw material is a variable cost. Variable costs vary BASED on the AMOUNT of OUTPUT, while fixed costs are the same regardless of production output.

 Increase

If the DEMAND for a COMMODITY is inelastic, an increase in its pice will CAUSE the total expenditure of the consumers of the commodity to Increase. When demand is inelastic, a fall in the price of a commodity leads to fall in total expenditure on it. On the other HAND, when price increases, total expenditure also increases.

 NEGATIVE

When price elasticity of demand for NORMAL goods is calculated, the value is ALWAYS Negative. The PED is the percentage change in quantity demanded in response to a one percent change in price. The PED coefficient is usually negative, although economists often ignore the sign. Demand for a good is relatively INELASTIC if the PED coefficient is less than one (in ABSOLUTE value).

 Saving

The classical theory EXPLAINED INTEREST as a REWARD for Saving. According to the classical theory, interest is the PRICE paid for saving of capital. Like the VALUE of other things, the price of saving is determined by its demand for and supply of savings.

 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. Consumers do not have any alternative and must PAY the price set by the seller.

 Power to satisfy a WANT

Utility MEANS power to satisfy a want. It is a quality POSSESSED by a commodity or service to satisfy HUMAN wants. Utility can also be defined as value-in-use of a commodity because the satisfaction which we GET from the consumption of a commodity is its value-in-use.

 Terms of trade

The OFFER curves introduced by ALFRED Marshall, HELPS us to UNDERSTAND how the terms of trade is established in international trade. An offer curve shows how the VOLUMES traded change when the terms of change.

 Perfect competition

Price discrimination is not possible in case of Perfect competition. Price discrimination is not possible under perfect competition, even if the two markets could be kept SEPARATE. Since market DEMAND in each market is perfectly elastic, every seller would try to sell in that market in which could get the highest price. Competition would make the price EQUAL in both the markets. However, price discrimination is possible and profitable only when markets are IMPERFECT.

 The law of diminishing marginal UTILITY

The law of consumer surplus is based on the law of diminishing marginal utility. The concept of consumer surplus is DERIVED from the law of diminishing marginal utility. As per the law, as we purchase more of a COMMODITY, its marginal utility REDUCES. Since the price is FIXED, for all units of the goods we purchase, we get extra utility. This extra utility is consumer surplus.

 An INDIFFERENCE curve relating the two goods will be linear

If two goods were perfect substitutes of each other, it necessarily follows that an indifference curve relating the two goods will be linear. As PRICE rises for a fixed money INCOME, the consumer seeks the less expensive SUBSTITUTE at a LOWER indifference curve.

 All of the above

When a competitive FIRM achieves LONG RUN equilibrium, then, P=MC, MR=MC and P=ATC.

 Their RESPECTIVE minimas

The MC CURVE CUTS the AVC and ATC curves at their respective minimas.

 Preparation of the plan

Preparation of the plan is the task of the PLANNING COMMISSION. The Planning Commission is CHARGED with the responsibility of making assessment of all RESOURCES in the country, augmenting deficient resources, formulating plans for the most effective and balanced utilisation of resources and determining priorities.

 Many buyers and many SELLERS

Many buyers and many sellers is one of the assumptions of perfect competition. Yes, in a perfectly competitive market, there are many buyers and many sellers. As a consequence, they have no market POWER and cannot influence the market price. This is an ASSUMPTION of the model of perfect competition.

 MR=MC

MR=MC is the condition of equilibrium for the monopolist. The conditions for Equilibrium in Monopoly are the same as those under perfect competition. The MARGINAL cost (MC) is equal to the marginal REVENUE (MR).

 Monopoly

The AR curve and industry demand curve are same in case of Monopoly. 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.

 Positive

Income ELASTICITY of demand for NORMAL GOODS is always Positive. A positive income elasticity of demand is ASSOCIATED with normal goods; an increase in income will lead to a rise in demand.