What this means is you to from the section of harmony IC is actually convex for the origin. Let’s understand the drawing listed below:
The indifference map depicts three indifference curves titled ICstep 1, ICdos and ICstep step 3 respectively. 2. The budget line touches 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 MRXXY = PX/PY and MRS is diminishing.
Concern step three. (a) Explore one or two differences between yields so you’re able to level and you can production so you https://datingranking.net/tr/milfaholic-inceleme/ can an excellent variable grounds. (b) With the help of a drawing, explain the relationships anywhere between AR and you may MR out of a company under imperfect race. (c) Mention any five top features of monopoly market. Answer: (a) A couple differences when considering efficiency so you can scale and you may productivity so you’re able to an adjustable basis are as follows:
(b) The partnership ranging from AR and you can MR regarding a strong significantly less than incomplete competition is provided less than: Each other Dominance and you can Monopolistic Race end up in the course of Imperfect Race. Thus, AR and MR curves hill downwards much more devices are going to be ended up selling merely by detatching the purchase price. But not, you will find one significant difference in AR and you may MR shape regarding dominance and you will monopolistic competition.
Not as much as monopolistic battle, brand new AR and you can MR contours be much more elastic compared to the the ones from Monopoly. Very, if cost of a product was improved in both brand new places, then proportionate fall in consult not as much as monopoly is less than proportionate belong demand lower than monopolistic race.
(c) The advantages off monopoly field are as follows: (i) Single provider and you may hundreds of people: A dominance keeps one supplier otherwise a small grouping of vendors one along with her promote an excellent. Ergo, a monopoly has actually one enterprise. Although not, discover hundreds of people during the a dominance business. The latest customers cannot determine the expense of the item.
(ii) Barriers to entryway: A dominance markets possess higher barriers otherwise constraints into the entryway of your own brand new enterprise. For the reason that monopolies are apt to have personal rights over particular resources otherwise patent liberties.
(iii) Book products: The goods given by an effective monopolist is actually book, and there are no intimate alternatives of them products.
It occurs because of the visibility out-of close substitutes under monopolistic competition and also the lack of personal substitutes around monopoly
(iv) Higher control of rates: While the a dominance business enjoys one provider, the seller keeps a leading degree of command over the price.
Given the budget limitation of the individual, the best apathy curve you to definitely a consumer can also be arrive at is actually IC
(v) Rates discrimination: An excellent monopolist can also be take on speed discrimination to make higher winnings. Rates discrimination relates to asking more price of some other people to have the same an effective. Particularly, the cost of an amusement park’s ticket can be more to have pupils, adults and you can the elderly.
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. Ed = Lower segment of the demand curve/Upper segment of the demand curve. Let us see the diagram below.