June 2, 2026 1:20 am
Consumers can always compare any two goods or products and decide if he/she prefers one of them or is indifferent between them. Now based on consumer preferences we can categorize various types of goods as follows. Perfect Substitutes : When the consumer wants to...
Q1. How the following change will affect LM curve: a) increase in money supply b) increase in output c)a one time increase in price level d) a decrease in money demand due to increased use of ATM machines (people demand less money at any given interest rate) a) When...
Q1. What does the intercept of the budget line on X -axis show? Ans: The horizontal intercept of budget line is (M/Px) where M is the money income and Px is the price of commodity x. Therefore, M/Px denotes the maximum amount of 'x' that can be purchased by spending...
1. Suppose the Govt. decides to cut taxes to increase consumer spending and investment in the economy. a) Will this plan succeed in accomplishing both goals? b)In equilibrium what happens to interest rate as a result of this action? c) Would you characterize this as a...
The law of demand states that keeping all other things constant, an increase in the price of any good reduces its demand and the lower the price of the good, people will be more inclined to buy that product. Therefore, price and quantity demanded are inversely...
Price Ceiling : A price ceiling is the maximum price of a product set by the Government or Law. It is usually set when the market price of that product, usually a necessary good, goes way above the usual level. Now it is understandable that when prices are set lower...
Definition of Consumer Surplus : Consumer surplus is the difference between the market price and the maximum price that the consumers are willing to pay for a particular product. Definition of Producer Surplus : Producer Surplus is the difference between the market...
Let's understand what Monopoly and Perfect Competition is first and then we can point out what their differences are. Monopoly: In a monopoly there is just one firm who has captured the entire market of a particular product or services and do not have any competitor...
Elasticity of Demand measures how sensitive the quantity demanded is to a change in price of a product. Formula : % change in quantity demanded divided by % change in price. Let's understand the formula with the help of an example. Old Price New...