Economics (402)
Q.1 Which definition of
economics is based upon the notions of ends, means and alternative uses. Also
discuss why the said definition is preferred over all other definitions. (20)
Economics can be defined as the study of how individuals, businesses, and governments make
decisions about the allocation of limited resources to satisfy unlimited wants and needs. This definition of economics is based upon the notions of ends, means, and alternative uses. It is preferred over other definitions because it emphasises the scarcity of resources and the real-world decisions that must be made in order to allocate them efficiently.Dear Student,
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First, this definition of economics emphasises the scarcity of resources.
Economics is based on the premise that resources are limited and must be
allocated accordingly. This implies that individuals, businesses, and
governments must make decisions about how to use their limited resources in
order to satisfy their unlimited wants and needs. This is the concept of
scarcity: the idea that there is a finite amount of resources available which
must be distributed in an efficient manner. This is an important concept in
economics and is highlighted in the definition.
Second, this definition of economics emphasises the real-world
decisions that must be made in order to allocate resources efficiently.
Economics is concerned with how decisions are made in the face of scarcity. It
involves making choices between different types of resources, and allocating
them in the most efficient manner possible. This definition of economics draws
attention to the need for decision-making, and highlights the fact that
decisions need to be made in order to ensure resources are allocated in the most
effective way.
Third, this definition of economics emphasises the notion of ends,
means, and alternative uses. This is an important concept in economics which is
often overlooked. Ends are the desired outcomes of a decision, such as
increased profit or decreased costs. Means are the resources that can be used
to achieve these ends. Alternative uses are the other potential uses of these
resources, such as investing in another business or using the resources to
produce a different product. This definition of economics emphasises the need
to consider these three aspects when making decisions about the allocation of
resources.
Finally, this definition of economics is preferred over other
definitions because it is broad enough to encompass the various aspects of the
discipline. Other definitions of economics can be too narrow, focusing on one
particular area such as microeconomics or macroeconomics. This definition,
however, encompasses all aspects of the discipline and highlights the
importance of decision-making and resource allocation.
In conclusion, this definition of economics is based upon the
notions of ends, means, and alternative uses. It is preferred over other
definitions because it emphasises the scarcity of resources and the real-world
decisions that must be made in order to allocate them efficiently. Furthermore,
it is broad enough to encompass the various aspects of the discipline, from
microeconomics to macroeconomics. This definition of economics therefore
provides a comprehensive overview of the discipline and is the preferred
definition for economists.
Q.2 Is utility another
name of usefulness? After discussing marginal utility, define law of
diminishing marginal utility. Also explain this law with the help of a table
having hypothetical data and the diagram drawn on the basis of this hypothecal
table. (20)
Utility is a term used to describe the relative satisfaction or
benefit that someone derives from a particular product or service. While
utility and usefulness can be used interchangeably, they are not exactly the
same thing. Utility is more closely related to the value of a particular
service or product, while usefulness refers to the practicality of it.
Marginal Utility
Marginal utility is an economic concept that refers to the additional
satisfaction or benefit gained from consuming one more unit of a particular
good or service. It is the change in total utility divided by the change in the
number of units consumed. It is often measured in terms of utils, which are a
unit of measurement for utility. The law of diminishing marginal utility states
that as more units of a good or service are consumed, the marginal utility
derived from each additional unit will decrease.
Law of Diminishing Marginal Utility
The law of diminishing marginal utility states that as the
consumption of a given product increases, the marginal utility derived from
consuming each additional unit of that product or service decreases. This is
because the utility of consuming additional units of the same product or service
decreases over time, as the consumer's satisfaction or pleasure derived from
consuming the additional unit diminishes. The law of diminishing marginal
utility is an important economic concept because it explains why consumers are
willing to pay more for a small amount of a product than for a large amount of
the same product.
Table and Diagram
The following table and diagram illustrate the law of diminishing
marginal utility.
Table
Units Total Utility Marginal Utility
1 10 utils 10 utils
2 19 utils 9 utils
3 26 utils 7 utils
4 32 utils 6 utils
5 37 utils 5 utils
Diagram
As can be seen from the diagram, the total utility increases as
more units of the product or service are consumed, while the marginal utility
decreases. As the consumer consumes more units of the product or service, the
utility derived from each additional unit decreases, as the satisfaction or
pleasure derived from consuming the additional unit diminishes.
The law of diminishing marginal utility is an important economic
concept as it explains why consumers are willing to pay more for a small amount
of a product than for a large amount of the same product. Consumers are willing
to pay more for the smaller amount of the product because the marginal utility
derived from the smaller amount is higher than the marginal utility derived
from the larger amount. This means that consumers are willing to pay more for a
smaller amount of a product because they are getting more satisfaction or
pleasure from it than from a larger amount of the same product.
In conclusion, the law of diminishing marginal utility is an important
economic concept which states that as the consumption of a given product
increases, the marginal utility derived from consuming each additional unit of
that product or service decreases. This law explains why consumers are willing
to pay more for a small amount of a product than for a large amount of the same
product.
Q.3 How do you explain
the consumer equilibrium with the help of indifference curves? Also discuss the
concept of income-consumption curve with the help of a diagram.
How do you explain the consumer equilibrium with the help of
indifference curves?
The consumer equilibrium is a concept from economics that refers to
the optimal combination of goods that a consumer can purchase in order to
maximize their utility or satisfaction. The consumer equilibrium is determined
by the consumer’s preferences, budget, and prices of the goods. The consumer
equilibrium can be explained with the help of indifference curves, which are
graphical representations of the consumer’s preferences for different
combinations of goods. In this paper, I will discuss how the consumer
equilibrium can be explained using indifference curves. I will begin by
explaining the concept of consumer equilibrium, then discuss how indifference
curves can be used to explain the consumer equilibrium, and finally explain the
implications of consumer equilibrium for market structures.
Consumer Equilibrium
The consumer equilibrium is the optimal combination of goods that a
consumer can purchase in order to maximize their utility or satisfaction. It is
based on the consumer’s budget, preferences, and prices of the goods. A
consumer’s budget is the amount of money that they have to spend. It is the
maximum amount of money that a consumer can spend on goods. A consumer’s
preferences are the satisfaction that they get from consuming different
combinations of goods. The prices of the goods are the cost of the goods in
terms of money.
The consumer equilibrium is determined by the consumer’s budget
constraint, which is a graphical representation of the consumer’s budget. The
budget constraint shows the combinations of goods that a consumer can purchase
given their budget. The consumer equilibrium is the combination of goods that
maximizes the consumer’s utility given their budget constraint.
Indifference Curves
Indifference curves are graphical representations of the consumer’s
preferences for different combinations of goods. An indifference curve shows
the combinations of goods that give the consumer the same level of
satisfaction. The consumer will choose the combination of goods that is on the
highest indifference curve. It is important to note that the consumer’s
preferences are represented by the slope of the indifference curve, not the
height. The higher the indifference curve, the higher the level of satisfaction
that the consumer will get from the combination of goods.
The consumer equilibrium is the combination of goods that is on the
highest indifference curve that is not beyond the budget constraint. This is
the combination of goods that maximizes the consumer’s utility given their
budget constraint.
Explaining Consumer Equilibrium with Indifference Curves
The consumer equilibrium can be explained with the help of
indifference curves. The consumer equilibrium is the combination of goods that
is on the highest indifference curve that is not beyond the budget constraint.
This is the combination of goods that maximizes the consumer’s utility given
their budget constraint.
The consumer’s budget constraint is represented by a line on the
graph. The consumer’s preferences are represented by the indifference curves.
The consumer will choose the combination of goods that is on the highest
indifference curve that is not beyond the budget constraint. This is the
combination of goods that maximizes the consumer’s utility given their budget
constraint.
An example of how the consumer equilibrium can be explained with
the help of indifference curves is shown in Figure 1. The consumer’s budget
constraint is represented by the line AB. The consumer’s preferences are
represented by the indifference curves IC1, IC2, and IC3. The consumer will
choose the combination of goods that is on the highest indifference curve that
is not beyond the budget constraint. In this case, the consumer will choose the
combination of goods that is on IC2. This is the combination of goods that
maximizes the consumer’s utility given their budget constraint.
Implications of Consumer Equilibrium for Market Structures
The consumer equilibrium has important implications for market
structures. The consumer equilibrium determines the demand for goods in the
market. If the consumer’s preferences change, the demand for a good in the
market will also change. The consumer equilibrium also determines the prices of
the goods in the market. If the prices of the goods change, the consumer
equilibrium will also change.
The consumer equilibrium also has implications for market
structures. In a perfectly competitive market, the demand for a good is
determined by the consumer equilibrium. In an oligopoly market, the demand for
a good is determined by the actions of the firms. In a monopolistic market, the
demand for a good is determined by the pricing decisions of the firm.
In conclusion, the consumer equilibrium can be explained with the
help of indifference curves. Indifference curves are graphical representations
of the consumer’s preferences for different combinations of goods. The consumer
equilibrium is the combination of goods that is on the highest indifference
curve that is not beyond the budget constraint. This is the combination of
goods that maximizes the consumer’s utility given their budget constraint. The
consumer equilibrium has important implications for market structures. It
determines the demand for goods in the market and the prices of the goods in
the market.
Also discuss the concept of income-consumption curve with the help
of a diagram.
Income-consumption curve is a concept that is used to measure the
relationship between income and consumption. It is a graphical representation
of the relationship between income and the amount of goods and services that
people purchase at various income levels. It is also used to measure the
relationship between the cost of living and the level of income. This
relationship is often referred to as the income-consumption curve.
The income-consumption curve is an important economic concept that
is often used to measure the degree of economic growth or recession in a
country. It is also used to measure the level of economic inequality between
different income groups in a country. As the income of a group increases, the
consumption of goods and services is expected to increase as well. However, the
relationship between income and consumption is not always linear, as some
people may have higher levels of consumption than others even at the same
income level.
The concept of the income-consumption curve can be used to measure
the level of economic inequality in a society. It can be used to study the
impact of taxation on economic growth and to measure the levels of savings and
investment that are taking place in an economy. It is also used to analyze the
relationship between income and poverty levels in a country.
Income-Consumption Curve
An income-consumption curve is a graphical representation of the
relationship between income and consumption. It is a graphical representation
of the relationship between the level of income and the amount of goods and
services that people purchase at various income levels. The income-consumption
curve is a useful tool to measure the degree of economic growth or recession in
a country. It is also used to measure the level of economic inequality between
different income groups in a country.
The income-consumption curve is a curve that shows the relationship
between the level of income and the amount of goods and services that people
purchase at various income levels. The curve usually has an upward slope,
meaning that as income increases, consumption also increases. This is because
as income increases, people are able to purchase more goods and services, and
thus the demand for them rises.
The shape of the income-consumption curve depends on the type of
goods and services being purchased and the level of income. For example, if the
goods and services being purchased are luxury items, then the curve may have a
steeper slope as the income increases. On the other hand, if the goods and
services being purchased are necessities, then the curve may have a more
gradual slope.
The income-consumption curve can be used to measure the level of
economic inequality in a society. It can be used to study the impact of
taxation on economic growth and to measure the levels of savings and investment
that are taking place in an economy. It is also used to analyze the relationship
between income and poverty levels in a country.
Income-Consumption Curve and Economic Inequality
The income-consumption curve is useful to measure the level of
economic inequality in a society. Income inequality is the difference between
the amount of money that people earn in a given country, region or population.
It is usually measured by looking at the distribution of income across
different people and groups. Income inequality has been a major focus of
economic research in recent years, as it has been found to have a significant
impact on economic growth and development.
The income-consumption curve can be used to measure the level of
income inequality in a society. It can be used to study the impact of taxation
on economic growth and to measure the levels of savings and investment that are
taking place in an economy. It is also used to analyze the relationship between
income and poverty levels in a country.
The income-consumption curve can be used to measure the degree of
economic inequality between different income groups in a country. It can be
used to analyze the impact of taxation on economic growth and to measure the
levels of savings and investment that are taking place in an economy. It is
also used to study the relationship between income and poverty levels in a
country.
The income-consumption curve can be used to measure the degree of
economic inequality between different income groups in a country. Higher levels
of economic inequality can lead to slower economic growth and higher levels of
poverty. This is because when economic inequality is high, the income of the
wealthy is not shared with the rest of the population, which can lead to slower
economic growth.
In conclusion, the income-consumption curve is an important
economic concept that is often used to measure the degree of economic growth or
recession in a country. It is also used to measure the level of economic
inequality between different income groups in a country. As the income of a
group increases, the consumption of goods and services is expected to increase
as well. However, the relationship between income and consumption is not always
linear, as some people may have higher levels of consumption than others even
at the same income level.
The income-consumption curve can be used to measure the level of
economic inequality in a society. It can be used to study the impact of
taxation on economic growth and to measure the levels of savings and investment
that are taking place in an economy. It is also used to analyze the relationship
between income and poverty levels in a country. Higher levels of economic
inequality can lead to slower economic growth and higher levels of poverty.
Thus, the income-consumption curve is a useful tool to measure the degree of
economic inequality in a society.
Q.4 What is meant by
supply curve of a firm? How can a supply curve of a firm be derived from
marginal cost of firm. Explain with the help of a table and diagram.
The supply curve of a firm is a graphical representation of the
amount of a particular product or service a firm is willing and able to produce
and sell at different prices over a period of time. It shows the maximum amount
of the product or service a firm can supply at each price level. It is derived
from the marginal cost of the firm, which represents the cost of producing an
additional unit of the product or service. The supply curve of a firm is
therefore an important tool in understanding the behaviour of firms in the
market and how they respond to changes in market conditions.
Definition of Supply Curve
A supply curve is a graphical representation of the amount of a
product or service a firm is willing and able to produce and sell at different
prices over a period of time. The supply curve shows the maximum amount of the
product or service a firm can supply at each price level. The supply curve is
an important tool for understanding the behaviour of firms in the market and
how they respond to changes in market conditions.
Derivation of Supply Curve from Marginal Cost
The supply curve of a firm is derived from the firm’s marginal
cost, which is the cost of producing an additional unit of the product or
service. This is calculated by taking the total cost of production and dividing
it by the number of units produced. The higher the marginal cost, the higher
the price a firm must charge to break even on the cost of production. The
supply curve of a firm is determined by the marginal cost of production, as the
firm will only produce the product or service if the price they can charge is higher
than the marginal cost.
The following table shows how the supply curve can be derived from
the marginal cost of a firm.
Table 1: Deriving the Supply Curve from Marginal Cost
Price ($) Quantity
(Units) Marginal Cost ($)
10 0 0
15 2 7
20 4 10
25 6 13
30 8 15
From the table, we can see that the marginal cost of producing an
additional unit of the product or service increases as the price increases.
This means that the firm will be willing to supply more units at a higher
price, as the cost of production for each additional unit is lower. The
marginal cost is also the point at which the supply curve intersects the
vertical axis.
Diagram
Figure 1: Supply Curve Derived from Marginal Cost
In Figure 1, we can see a graph of the supply curve derived from
the marginal cost of the firm. The vertical axis represents the price of the
product or service, and the horizontal axis represents the quantity of the
product or service supplied by the firm. We can see that as the price of the
product or service increases, the quantity of the product or service the firm
is willing to supply also increases. This is reflective of the marginal cost of
the product or service, which increases as the price increases.
In conclusion, the supply curve of a firm is a graphical representation
of the amount of a particular product or service a firm is willing and able to
produce and sell at different prices over a period of time. It shows the
maximum amount of the product or service a firm can supply at each price level.
The supply curve is derived from the firm’s marginal cost, which is the cost of
producing an additional unit of the product or service. The higher the marginal
cost, the higher the price a firm must charge to break even on the cost of
production. The supply curve of a firm is an important tool for understanding
the behaviour of firms in the market and how they respond to changes in market
conditions.
Q.5 Write a note on the
following: (5+5+5+5=20)
a) Total, average and
marginal revenue under perfect competition.
Total, average and marginal revenue are the three measures of
revenue that are used to analyze the financial performance of firms in a
perfectly competitive market. Perfect competition is a market structure
characterized by a large number of firms that are price takers, meaning that
they must accept the market price set by the industry and cannot set their own
prices.
Total revenue is the total amount of money a firm receives from the
sale of its products and services. It is determined by multiplying the quantity
of products and services sold by the market price. Total revenue increases as
more products and services are sold, up to the point where the firm reaches its
maximum capacity.
Average revenue is calculated by dividing total revenue by the
quantity of products and services sold. Average revenue is also referred to as
price, as it is the amount of money that a customer must pay for the product or
service. Average revenue will remain the same regardless of the quantity of
products and services sold, as long as the price remains the same.
Marginal revenue is the additional revenue that is generated by the
sale of one additional unit of a product or service. It is calculated by
subtracting the total revenue from the sale of one fewer unit from the total
revenue from the sale of one more unit. Marginal revenue is always equal to the
market price in perfectly competitive markets, as firms have no control over
the price.
In perfectly competitive markets, the total, average and marginal
revenue curves all slope downwards. This is because as more products and
services are sold, the price of each one decreases due to the increased
competition for customers. As the price of each product and service decreases,
the total revenue generated by the firm decreases as well, as does the average
and marginal revenue.
In summary, total, average and marginal revenue are the three
measures of revenue used to analyze the financial performance of firms in a
perfectly competitive market. Total revenue is the total amount of money a firm
receives from the sale of its products and services, and it increases as more
products and services are sold. Average revenue is the amount of money that a
customer must pay for a product or service, and it remains the same regardless
of the quantity of products and services sold. Marginal revenue is the
additional revenue that is generated by the sale of one additional unit of a
product or service, and it is always equal to the market price in perfectly
competitive markets.
b) Demand curve in
case of inferior good case.
An inferior good is a type of good whose demand decreases when a
consumer’s income increases and vice versa. In other words, an inferior good is
one whose demand falls when the consumer's income rises, and increases when the
consumer's income falls. Examples of inferior goods include generic brands,
fast food, and used cars. The demand curve for an inferior good is usually
downward sloping, which means that as price increases, the quantity demanded
decreases.
The demand curve for an inferior good is downward sloping because
of the law of demand. The law of demand states that when price increases,
quantity demanded decreases and vice versa. So, as the price of an inferior
good increases, people are less willing to buy it, resulting in a decrease in
the quantity demanded. Conversely, as the price of an inferior good decreases,
people are more willing to buy it, resulting in an increase in the quantity
demanded.
In addition to the law of demand, the demand curve for an inferior
good is downward sloping because of income effects. An income effect is the
increase or decrease in demand for a good due to a change in a consumer’s
income. When a consumer’s income rises, demand for an inferior good decreases,
because the consumer is able to afford more expensive goods. Conversely, when a
consumer’s income falls, demand for an inferior good increases, because the
consumer is less able to afford more expensive goods.
The demand curve for an inferior good can shift due to a number of
factors. For example, the demand curve can shift if the prices of substitutes
and complements change. If the price of a substitute good increases, the demand
for an inferior good increases, because the consumer is less willing to buy the
expensive substitute good. Similarly, if the price of a complement good
increases, the demand for an inferior good decreases, because the consumer is
less willing to buy the expensive complement good.
In conclusion, the demand curve for an inferior good is downward
sloping because of the law of demand and income effects. The demand curve can
also shift due to changes in the prices of substitutes and complements.
Understanding the demand curve for an inferior good is important for
businesses, as it helps them determine pricing strategies and make informed
decisions about their products.
c) Substitution
effect.
The substitution effect is an economic concept that refers to the
impact of a change in price on the demand for a particular good or service.
This effect can be used to explain a wide range of economic phenomena,
including the effect of taxes, subsidies, and changes in the cost of living. In
simple terms, the substitution effect states that when the price of a good or
service increases, consumers will substitute away from that good or service in
favor of a less expensive alternative.
The substitution effect is related to the law of demand, which
states that as the price of a good or service increases, the demand for that
good or service decreases. The substitution effect is the result of consumers
reallocating their spending from the more expensive good or service to a less
expensive alternative. This substitution effect can be seen in the effect of
taxes on consumer spending. When the price of a good or service increases
because of a tax, consumers will typically substitute away from that good or
service and instead purchase a less expensive alternative.
The substitution effect can also be seen in the effect of changes
in the cost of living on consumer spending. When the cost of living increases,
consumers will typically substitute away from higher cost goods and services,
such as housing and transportation, and instead purchase lower cost
alternatives. This substitution effect can be seen in the effect of inflation
on consumer spending. When the cost of living increases due to inflation,
consumers will typically substitute away from higher cost goods and services
and instead purchase lower cost alternatives.
The substitution effect is an important concept for understanding
the behavior of consumers in response to changes in price. By understanding the
substitution effect, economists can better understand the impact of taxes,
subsidies, and changes in the cost of living on consumer spending. This
understanding can be used to inform economic policies that are designed to
promote economic growth and stability.
d) Diminishing
marginal rate of substitution.
Diminishing marginal rate of substitution (MRS) is an economic
concept that explains how the relative value of two goods or services decreases
as the amount of one of them increases. It is based on the idea that when a
consumer has a fixed amount of money to spend, the marginal rate of
substitution between two goods or services decreases as the amount of one of
them increases. This is because the consumer will be willing to sacrifice a
smaller amount of the other good or service in order to acquire more of the one
they already have.
For example, if a consumer has a fixed budget of $100, they may be
willing to sacrifice $20 of one good in order to acquire an additional $30 of
the other. However, if they have already acquired $50 of one good, they may be
willing to sacrifice only $10 of the other in order to acquire an additional
$30 of the first. This is because as the amount of one good increases, the
marginal rate of substitution decreases.
The concept of diminishing marginal rate of substitution is
important for understanding how consumers make decisions about how to allocate
their limited resources. It is also helpful for understanding how producers can
adjust the prices of their goods and services in order to maximize their
profits. For example, if a producer notices that the demand for their product
is decreasing, they can lower the price in order to make it more attractive to
consumers. This will reduce the amount of money that consumers are willing to
sacrifice in order to acquire the product, which will in turn increase the
producer's profits.
The concept of diminishing marginal rate of substitution is also
useful for understanding how different firms and industries compete with one
another. If one firm is able to produce a product at a lower cost than its
competitors, it can charge a lower price in order to attract more customers.
This will reduce the amount of money that the consumers are willing to
sacrifice in order to acquire the product, thus putting pressure on the other
firms to lower their prices or find other ways to increase their competitive
advantage.
Overall, diminishing marginal rate of substitution is an important
concept in economics that helps to explain how consumers make decisions about
how to allocate their limited resources, how producers adjust prices in order
to maximize their profits, and how different firms and industries compete with
one another. It is a useful tool for understanding how the market works and how
different economic forces interact with one another.
Dear Student,
Ye sample assignment h. Ye bilkul
copy paste h jo dusre student k pass b available h. Agr ap ne university
assignment send krni h to UNIQUE assignment
hasil krne k lye ham c contact kren:
0313-6483019
0334-6483019
0343-6244948
University c related har news c
update rehne k lye hamra channel subscribe kren: