Anbu
Part -2
1. Define ‘Arc Elasticity’?
Arc Elasticity: The arc elasticity is a measure of average elasticity, that is the elasticity at the midpoint of the chord that connects the two points (A and B) on the demand curve by the initial and new price levels. The measure of arc elasticity is an approximation of the true elasticity of the section AB of the demand curve. The more convex to the origin the demand curve is the poorer the linear approximation attained by the arc elasticity formula. 2. Explain the law of ‘Diminishing marginal returns’.
The marginal utility refers to the change in satisfaction which results when a little more or little less of that good is consumed. The law of diminshing marginal utility says that with the increase in the consumption of a good there is a decrease in the marginal utility that person derives from consuming each additional unit of that product.
3. What is ‘Prisoner’s Dilemma’, of non cooperative game?
Game theory can be used to model a wide variety of human behavior in small number and large number economic, political, and social settings.
The choice settings in which economists most frequently apply game theory, however, are small number settings in which individual decisions and welfare are interdependent. In such settings, each person's welfare depends, in part, on the decisions of other individuals "in the game."
i. In Cournot duopoly, each firm's profits depend upon its own output decision and that of the other firm in the market. ii. In a setting where pure public goods are consumed, one's own consumption of the public good depends in part on one's own production level of the good, and, in part, on that of all others. For example, after a snow fall, the amount of snow on neighborhood sidewalks depends partly on your own efforts at shoveling and partly that of all others in the neighborhood. iii. Game theoretic treatments are less interesting in cases where there are no interdepencies. For
1. Define ‘Arc Elasticity’?
Arc Elasticity: The arc elasticity is a measure of average elasticity, that is the elasticity at the midpoint of the chord that connects the two points (A and B) on the demand curve by the initial and new price levels. The measure of arc elasticity is an approximation of the true elasticity of the section AB of the demand curve. The more convex to the origin the demand curve is the poorer the linear approximation attained by the arc elasticity formula. 2. Explain the law of ‘Diminishing marginal returns’.
The marginal utility refers to the change in satisfaction which results when a little more or little less of that good is consumed. The law of diminshing marginal utility says that with the increase in the consumption of a good there is a decrease in the marginal utility that person derives from consuming each additional unit of that product.
3. What is ‘Prisoner’s Dilemma’, of non cooperative game?
Game theory can be used to model a wide variety of human behavior in small number and large number economic, political, and social settings.
The choice settings in which economists most frequently apply game theory, however, are small number settings in which individual decisions and welfare are interdependent. In such settings, each person's welfare depends, in part, on the decisions of other individuals "in the game."
i. In Cournot duopoly, each firm's profits depend upon its own output decision and that of the other firm in the market. ii. In a setting where pure public goods are consumed, one's own consumption of the public good depends in part on one's own production level of the good, and, in part, on that of all others. For example, after a snow fall, the amount of snow on neighborhood sidewalks depends partly on your own efforts at shoveling and partly that of all others in the neighborhood. iii. Game theoretic treatments are less interesting in cases where there are no interdepencies. For