CHAPTER 2 THE BASICS OF SUPPLY AND DEMAND 1. Consider a competitive market for which the quantities demanded and supplied (per year) at various prices are given as follows: Price ($ ) Demand Supply (millions) (millions) 60 22 14 80
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Define and explain the use of indifference curves. Why are firms increasingly sensitive to the application of indifference curves in today’s economy? How does one construct and interpret indifference maps for purposes of corporate strategy? Define and explain the use of indifference curves. “An indifference curve illustrates the various combinations of two goods [or groupings of commodities] that would provide equal satisfaction.” i Therefore an indifference cure is a way to graphically show
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= FC‚ where F and C are the two goods available for purchase: food and clothing. a. Graph Juan’s indifference curves for the following levels of utility: 100‚ 200‚ and 300. Juan’s indifference curves for U = 100‚ 200 and 300 are pictured as follows. The general formula for the graph of an indifference curve for a given level of utility‚ U*‚ is F=U*/C (since U* = F x C). For example‚ the indifference curve for U* = 100 is
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Q.1. What are indifference curves? Explain the consumers’ equilibrium under the assumptions of ordinal approach. Utility of goods cannot be measured in terms of précised quantitative term. J. R. Hicks and R.G.D. Allen developed Indifference Curve analysis based on ordinal approach. Indifference curve (IC) is defined as the locus of point which show the different combination of two goods or commodities a consumer is indifferent about the point A or B or C or D. According to this analysis the consumer
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which the consumer is willing to trade one good for another at any given bundle. Explain. c. An Engel curve can be both positively and negatively sloped‚ why does this happen? d. What do we mean by the term “Consumer Surplus”? e. Han gets utility from consuming soda. He neither likes nor dislikes water. Place water on the horizontal axis and soda on the vertical axis. Draw a set of Han’s IC curves. f. Ralph and Rebecca are talking about how much they like going to the gym and how much they like
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that include 5 units of good 1 and 6 units of good 2. TRUE 11. There are two goods. You know how much of good 1 a consumer can afford if she spends all of her income on good 1. If you know the ratio of the prices of the two goods‚ then you could draw the consumer ’s budget line without any
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using the concept of utility. Two approaches to the concept of utility (Cardinalists and Ordinalists approach) describe how utility can be gauged. The analysis of how consumers make choices can be done using the budget constraint and indifference curves. An indifference curve shows various bundles of commodities that make the consumer equally happy‚ or give him the same level of satisfaction. Utility Defined Utility is a measure of the satisfaction that a consumer gets from consuming a commodity or a
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Barriers to entry: In theories of competition in economics‚ barriers to entry are the obstacles and hindrances that make it difficult for a company to enter a given market or industry. The most common barriers to entry include government regulation and economies of scale‚ but nowadays it is increasing for entry barriers to be viewed as a cost. Stigler defined barriers to entry as “A cost of producing which must be borne by a firm which seeks to enter an industry but is not borne by firms already
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1 Managerial Economics 2010 Answers to All Tutorial Questions Topic 1 : What is managerial economics Questions from Chapter 1 of the Text (McTaggart‚ Findlay & Parkin) Review Question 1 (pp. 4) List some examples of scarcity in Australia today. An example of scarcity at the economy-wide level would be people with lower incomes being forced to choose between food and petrol due to high prices for both. An example of scarcity at an individual level would be a person unable to afford both
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attainable indifference curve(tangent to the income budget line or MRS = |w/p|). At this point A‚ the individual will work Ls1 hours‚ enjoy La leisure hours and enjoy an income of Ca. Assuming the individual has attained a source of non-labour income‚ for example inheritance or lottery winnings‚ represented by vertical distance ZX on the graph. The income budget constraint will now become a kinked line KXZ. The presence of non-labour income allows the individual to reach a higher indifference curve and
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