Wednesday, August 15, 2007

Economics - Session 2



1.Slope :If independent variable increases by 1 unit, what is the change in the dependent variable
2.The slope of a production possibility frontier is the marginal opportunity cost of a commodity.
3.The shape of PPF is commonly drawn as concave downward to represent increasing opportunity cost with increased output of a good
4.If the opportunity cost of computer rises as the economy produces more of it, PPF is bow-shaped

The Market forces of Demand and Supply

A competitive market is one where
Ø there are large number of buyers and sellers;
Ø each buyer and seller has perfect knowledge about the market conditions
Ø no single buyer and seller can influence the market price – each is a price-taker
and must the market determined price

A competitive market is a 'Price Taker' market

Other things equal, the quantity demanded is negatively
related to the price. This relationship is true for most goods in
the economy and hence called the law of demand

Normal good - Demand falls when income falls
Inferior good - Demand rises when income falls
Ordinary good - Follow law of demand;demand falls if price rises

1 comment:

Anonymous said...

I am now studying principles of microeconomics and i would like to get answers from the text book of N.Gregory Mankiw.
Chapter 5, elasticity and its application problems and solutions.