Distinguish between microeconomics and macroeconomics.
Point of Difference | Microeconomics | Macroeconomics |
---|---|---|
Study Matters | It studies about individual economic units like households, firms, consumers, etc. | It studies about an economy as a whole. |
Deals with | It deals with how consumers or producers make their decisions depending on their given budget and other variables. | It deals with how different economic sectors such as households, industries, government and foreign sectors make their decisions. |
Method | The major microeconomic variables are price, individual consumer’s demand, wages, rent, profit, revenues, etc. | The major macroeconomic variables are aggregate price, aggregate demand, aggregate supply, inflation, unemployment, etc. |
Variables | The major microeconomic variables are price, individual consumer’s demand, wages, rent, profit, revenues, etc. | The major macroeconomic variables are aggregate price, aggregate demand, aggregate supply, inflation, unemployment, etc. |
Theories |
Various theories studied are:
|
Various theories studied are:
|
What is the supply curve of a firm in the long run?
The market price of a good changes from Rs 5 to Rs 20. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm’s supply curve is 0.5. Find the initial and final output levels of the firm.
A firm earns a revenue of Rs 50 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns a revenue of Rs 150. What is the price elasticity of the firm’s supply curve?
Distinguish between a centrally planned economy and a market economy.
How does the imposition of a unit tax affect the supply curve of a firm?
A consumer wants to consume two goods. The prices of the two goods are Rs 4
and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of the budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire
income on that good?
(iii) How much of good 2 can she consume if she spends her entire income on
that good?
(iv) What is the slope of the budget line?
Questions 5, 6 and 7 are related to question 4.
What is the relation between market price and average revenue of a price-taking firm?
What is budget line?
Suppose there are 20 consumers for a good and they have identical demand functions:
d(p)=10–3pd(p)=10–3p for any price less than or equal to 103103 and d1(p)=0d1(p)=0 at any price greater than 103.
Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?
Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?
Let the production function of a firm be Q=2 L2 K2Q=2 L2 K2
Find out the maximum possible output that the firm can produce with 5 units of LL and 2 units of KK. What is the maximum possible output that the firm can produce with zero units of LL and 10 units of KK?
Explain the concepts of the short run and the long run.
Consider the demand curve D (p) = 10 – 3p. What is the elasticity at price 53?
Distinguish between a centrally planned economy and a market economy.
What do you mean by ‘monotonic preferences’?
Consider the demand for a good. At price Rs 4, the demand for the good is 25 units. Suppose the price of the good increases to Rs 5, and as a result, the demand for the good falls to 20 units. Calculate the price elasticity.
If a consumer has monotonic preferences, can she be indifferent between the
bundles (10, 8) and (8, 6)?
What is the supply curve of a firm in the long run?
What is the relation between market price and average revenue of a price-taking firm?