Question
Does production take place only on the PP curve?
✓
Answer
The given statement may or may not be correct. If the given resources are fully and efficiently used in an economy, the production takes place on the PP curve. But if the resources in the economy are underutilised or inefficiently utilised or both, the production takes place inside the PP curve. The given figure illustrates the point.
On point F, and for that matter on any point on the production possibility curve OAB, the resources are fully and efficiently employed. On point U, below the PP curve or any other point, but below the PP curve, the resources are either underutilised or inefficiently utilised or both. Any point below the PP curve thus highlights the problem of unemployment and inefficiency in the economy.
On point F, and for that matter on any point on the production possibility curve OAB, the resources are fully and efficiently employed. On point U, below the PP curve or any other point, but below the PP curve, the resources are either underutilised or inefficiently utilised or both. Any point below the PP curve thus highlights the problem of unemployment and inefficiency in the economy.
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Production function.
Differentiate between substitute goods and complementary goods.
Consider a hypothetical demand and supply schedule of a commodity as given below:
Draw a diagram and find the equilibrium price and equilibrium quantity.
|
Price of X (₹)
|
Demand (Units) |
Supply (Units)
|
| 2 | 100 | 20 |
| 4 | 80 | 40 |
| 6 | 60 | 60 |
| 8 | 40 | 80 |
| 10 | 20 | 100 |
How does the budget line change if the consumer's income increases to Rs $40$ but the prices remain unchanged?
→Find maximum profit situation from the table:
Calculate:
| Output (in units) | TR (₹) | TC (₹) |
| 1 | 50 | 60 |
| 2 | 60 | 65 |
| 3 | 68 | 68 |
| 4 | 70 | 60 |
| 5 | 75 | 75 |
| 6 | 80 | 95 |
- Output level showing loss.
- Output level showing break-even point.
- Output level showing maximum profit.