Federation University
Business Economics

Micro Economics

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Name: Nikhil Deshpande
Student ID: 30351855
Subject: Business Economics

Question 2:

a) The income elasticity of demand for pre-recorded music Cd’s is 6 it would at last in a retreat influence the subsidence. It is on the grounds that in a retreat the interest in CD will fall definitely from high to low. Accordingly, it’s anything but a mandatory decent. Individuals may want to purchase other vital items. Consequently, the generation of products will decay and, in this way, drop in the pay level of the specialists.

b) They are dependable in rivalry with each other since they are consummately substitutable for each other. Individuals tend to go for mp3 music player if there is a fall in the interest for the minimized plate.

c) YED is 0.8 the great is ordinary since the salary flexibility is conceivable the for good increment when there is an expansion in the pay if the purchaser.

At the point when YED is-3.8 the great id second-rate great. Since the request is diminishing with expanding with pay of purchasers.

d) When YED is 0.79 when two merchandise is substitute with each other.

At the point when XED is – 3.5 the great are a supplement to each other. That is, one is utilized instead of another.

Question 5:

a) The impeccably aggressive market mirrors the total allotment of the asset with the opportunity of section and exit. In both short run and long run, value equivalents to P-MC, where portion productivity is accomplished. Moreover, at the balance level of value, customer and maker surplus is being expanded at this level. This is the place nobody is in an ideal situation on somebody and along these lines, nobody is deteriorating off will be a superior off without aggravating another off.

(Source: Learneconomicsonline.com)

Under monopolistic, focused firm does not occur to dispense the asset. The method of reasoning is for the nearness of a request bend which is negative. It likewise passes on that the value is significantly higher than the peripheral income bend. This additionally implies it is higher than the minimal cost bend which happens to be equivalent to the peripheral income bend.

(Source: learneconomicsonline.com)

Under the monopolistic aggressive firm does not occur to assign the asset. The justification is for the nearness of a request bend which is negative. It additionally passes on that the value is significantly higher than the negligible income bend. This additionally implies it is higher than the minor cost bend which happens to be equivalent to the minimum income curve. (b) Allocative productivity in the official rivalry

The beneath figure demonstrates that P=MC=MR prompt the presence of dispensed proficiency also at the balance level of value Consumer and maker surplus is being amplified at this level. this is the place nobody is in an ideal situation on somebody and thusly nobody is deteriorating off without aggravating another.
(Source: learneconomicsonline.com)

Allocating efficiency in monopolistic competition.

In the underneath chart monopolistic happening firm that does not show assigning the asset. allotment either in the short run when firms are procuring a financial benefit. Over the long haul, likewise, they don’t need to find your asset when they are turning zero benefits. This is on the grounds that when they are delivering MR=MC where cost does not equivalent to MR.

(Source: learneconomicsonline.com)

(c) In the short run, a firm tends to no growth on the grounds that all the resource productively apportioned. A firm will create just when process rises to short-run normal cost. As price= AR=MR=SMX=SAC, having ideal asset allotment.
Short run equilibrium of the firm
(Source: learneconomicsonline.com)

Short run equilibrium of Industry

(Source: learneconomicsonline.com)

Balance at E value level OP. hardly any organizations are procuring supernormal Profit and misfortune it is seen since.

(d): The firm can change all contributions, over the long haul, implies that a setup firm can choose to leave an industry or market in the event that it gains beneath typical benefit and another firm can enter an industry or current market in which acquiring of built up firm surpass ordinary benefit. The procedure of passage and exit of the new firm is the way to long-run Equilibrium if there is a monetary benefit, another firm enters the business and move the short-run showcase supply bend to one side.

The expansion in the short run supply makes the value fall to the point that financial benefits achieve zero over the long haul. On the opposite side if there are monetary misfortunes in an industry, the Existing firm will leave, Causing the short run advertise supply bend to move to one side and the cost to rise. This alteration proceeds to until the point that monetary misfortunes are dispensed with and financial benefit breaks even with zero un in the long run.

(Source: learneconomicsonline.com)

Question 7:

a: The ascent in the cost of margarine will prompt a fall in the interest in margarine. So, the request bend of margarine will contract. As P1 has expanded Q1 will fall.

(Source: learneconomicsonline.com)

(b): Bring up sought after for yogurt will thusly diminish in the cost of the margarine.

Give cost a chance to be 2, the increment in yogurt cost will at last move in the cost to 3
(c) The ascent in the cost of bread will along these lines prompt the expansion in the interest in margarine. Since purchaser will keep an eye on customer more bread, margarine request will increment at a given level.

(d): Ascend in the interest in bread will likewise here prompted the expansion popular for margarine, the request will increment for margarine will move the request bend to one side.

(e): Unexpected ascent in the cost of spread in future will prompt the rightward move of the request bend of margarine This will prompt an expansion sought after for margarine.

(f): Tax on spread generation will prompt an ascent in the cost of spread, individuals tend to have more margarine and as results request margarine increment. A rightward move happens.

(g): This development, be that as it may, can bring down the interest in margarine since spread will be sans cholesterol, the purchaser may switch their utilization level from margarine to spread. Along these lines, there will be an abatement in margarine level.

Question 8:

a) It speaks to short-run harmony position since normal cost bend is underneath the request bend.

b) P3 isn’t the long run harmony cost. Since over the long-haul balance, LRMC will converge the MR bend and the balance cost will be set where the amount delivered is resolved on the AR curve.

Benefit amplifying cost is P6 and quality is Q2
Benefit shaded zone.
c) After the passage of the new request bend will move to left and it will keep on shifting as long it will remain tanged to the ATC bend at the benefit expanding yield. The company’s financial benefit will be zero and never again there will be a space for a section. Consequently, om the long run where each firm to win an ordinary benefit, the long run balance bend will be the same as that of immaculate rivalry.
F) The AR=MR=LMC=LAC over the long haul. Since it displays the attributes of the long-run harmony of immaculate rivalry all the fix will be the balance level of cost and yield.

Question 3:
a) You are given the following data about two firms:

Firm A
Quantity 0 1 2 3 4 5 6
Total Revenue 0 10 20 30 40 50 60
Average Revenue – 10 10 10 10 10 10
Marginal Revenue – 10 10 10 10 10 10
Total Cost 30 42 50 60 76 100 140
Marginal Cost – 12 8 10 16 24 40
Average Cost ? 42 25 20 19 20 23.3

Firm B
Quantity 0 1 2 3 4 5 6
Total Cost 100 134 154 177 216 266 366
Average Cost ? 134 77 59 54 53.2 61
Marginal Cost – 34 20 23 39 50 100
Price 140 130 120 110 100 90 80
Marginal Revenue – 130 110 90 70 50 30
Total Revenue 0 130 240 330 400 450 480

(b): Are these firm operating in the short or long run?

Firm A: short run (it has fixed costs of $30 and thus some of its factors are fixed in supply)
Firm B: short run (it has fixed costs of $100 and thus some of its factors are fixed in supply)

(c): Are these firm operating under prefect or imperfect competition?

Firm A: perfect (horizontal demand (AR) curve)
Firm B: imperfect (downward-sloping demand (AR = price) curve)

(d): What level of output will these firm produce in the short run?

Firm A: 2 or 3 units (where MC = MR)
Firm B: 4 or 5 units (where MC = MR)

(e): How would you describe the profit position?
Ans: The Profits of firm A is decreased con

Firm A makes a loss of $30 ($50 – $20 or $60 – $30). This is the best it can do. Any other output will give a greater loss.
Firm B makes a profit of $184 ($400 – $216 or $450 – $266). This is the maximum profit it can make given the figures in the table.


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