Economics : 2019 : CBSE : [All India] : Set 3

(b)  Increase in resources

Explanation:

In the given figure, PPC has shifted to right at all points, it implies that the production of both the goods has increased at given the level of technology.

decreasing

Explanation:

Marginal Rate of Transformation = Δ Y/ Δ X is continuously decreasing. It implies that in order to produce more of one good X, we have to sacrifice more units of good Y.

The two examples of the implicit cost incurred by a firm are as follows:

1. Use of own building for production purposes by factory owner, and not receiving rent.
2. Use of own capital to purchase machinery for the production and not charging any interest

The expenditure made on the purchase of a variable factor of production or to hire casual labourer is termed as variable cost.

(c)  Elastic Supply

Explanation:

When there is more percentage change in quantity supplied due to a percentage unit change in price, it is known as elastic supply.

parallel to X-axis

Explanation:

The shape of the average revenue curve under perfect competition is parallel to X-axis. It is because in perfect competition, commodities are sold at uniform prices and the price is equal to marginal revenue which is equal to average revenue.

Total utility is defined as the total psychological satisfaction derived from the given stock of the commodity consumed. It can be estimated as the sum total of marginal utilities derived from the commodity.

TU =∑MU

Marginal utility is defined as the utility derived from the additional unit of the commodity consumed. It can be estimated as the change in TU due to change in one unit of the commodity consumed.

MUn = TU_n - TU_{n – 1}

For example, if the consumption of first unit of the commodity gives the satisfaction of 20 utils and the consumption of the second unit of the commodity gives 15 utils of satisfaction, then the total utility derived from consumption of one commodity is 20 utils and from consumption of two commodities will be 35 utils and the marginal utility for the consumption of the second unit will 15 utils.

"What to produce" is defined as the problem of allocation of resources or the problem of choice between different commodities say, consumer goods or capital goods that can be produced. It also deals with the problem in what quantity the goods should be produced with the scarce resources.

The problem of "what to produce" is closely related to the problem of resource allocation.

• It depends on the pattern of demand and the availability of resources.
• Choosing a particular commodity to produce means allocating resources in the production of that commodit.

(a) Positive Economics

Reason: Positive statements describe what was, what is and what would be under the given set of circumstances. All the statements are verified empirically.

In the given situation, the consumer price index presents the inflation rate in India which can be verified with available data.

(b) Normative Economics
Reason: Normative economic analysis describes “what ought to be”. Its objective is to determine the norms. Normative statements pronounce value judgment or an opinion relating to right or wrong of a particular policy matter and it is always a matter of debate.

where E_d = coefficient of price elasticity of demand

ΔP = change in price ; ΔQ = change in quantity demand

P = Original price and Q = Original quantity

Given, % change in price= ΔP x 100/P=4x100/10=40%

% Change in quantity demand = %ΔQ

E_d= 1.25

1.25 = %ΔQ/40%

%ΔQ =  1.25x40% =50

Thus, the percentage change in quantity demanded is 50.