Meaning you to in the point of equilibrium IC was convex on resource. Why don’t we see the drawing given just below:

The indifference map depicts three indifference curves titled IC_{step 1}, IC_dos and IC₃ respectively. ₂. The budget line touches www.datingranking.net/tr/mylol-inceleme/ IC₂ at point E, which is the equilibrium point. The points that lie to the left of point E lie on the lower indifference curve, i.e., IC₂ and indicate lower satisfaction. The points to the right of point E lie on the higher indifference curve, i.e., IC₃ which indicates the points that are outside the consumer’s budget. The budget line can be tangential to the Indifference Curve at a unique point where MRX_XY = P_X/P_Y and MRS is diminishing.

Concern step three. (a) Speak about a few differences between production to measure and output so you can a beneficial variable foundation. (b) With the aid of a drawing, explain the relationship ranging from AR and you may MR off a company under incomplete race. (c) Talk about any five top features of dominance field. Answer: (a) A couple of differences between output to help you measure and you can output so you’re able to a varying factor are listed below:

(b) The partnership anywhere between AR and you will MR out of a company below imperfect battle is provided less than: Each other Dominance and you can Monopolistic Battle fall into the class from Incomplete Race. Ergo, AR and you may MR contours mountain down much more tools would be offered merely by detatching the cost. But not, there can be that significant difference in AR and you can MR contours of dominance and you will monopolistic race.

Lower than monopolistic race, the fresh AR and you will MR shape be a little more elastic than the those of Dominance. Very, in the event that cost of a product is enhanced in both this new markets, up coming proportionate belong consult lower than monopoly was lower than proportionate belong consult significantly less than monopolistic race.

(c) The advantages away from dominance market are listed below: (i) Solitary seller and you will countless customers: A monopoly have an individual supplier otherwise a team of providers one with her promote a beneficial. For this reason, a monopoly has actually an individual firm. not, you will find countless consumers in the a monopoly industry. The brand new buyers usually do not dictate the expense of the product.

(ii) Traps to admission: A monopoly market features highest traps otherwise limitations towards the entryway of the latest company. This is because monopolies tend to have private legal rights more specific resources or patent liberties.

(iii) Novel goods: Items supplied by a monopolist are novel, there are not any personal alternatives of them goods.

It occurs by presence off close replacements around monopolistic competition additionally the absence of romantic alternatives less than dominance

(iv) High control over prices: Given that a monopoly market keeps just one vendor, the seller possess a premier degree of control of the price.

Because of the finances constraint of one’s individual, the greatest apathy curve you to a buyers can be reach try IC

(v) Price discrimination: A good monopolist can accept rates discrimination to make high winnings. Speed discrimination makes reference to charging you different rates regarding different customers to have an equivalent a. Instance, the cost of an amusement park’s pass is going to be some other to have pupils, people and you may older people.

Question 4. (a) Explain the various degrees of price elasticity of demand at different points on a straight-line demand curve. (b) Show with the help of a diagram, how a perfectly competitive firm earns normal profit in short-run equilibrium. (c) Explain with the help of diagrams how equilibrium price changes when there is a simultaneous increase of both, demand and supply. Answer: (a) The elasticity of demand varies across a straight-line demand curve. To measure the elasticity of demand along a straight-line demand curve, the following formula is used. E_d = Lower segment of the demand curve/Upper segment of the demand curve. Let us see the diagram below.