Explain the relationship between the marginal products and the total product of an input.
Relationship between marginal products (MP) and the total product (TP) can be represented graphically as
1) TP increases at an increasing rate till point K, when more and more units of labour are employed. The point K is known as the point of inflexion. At this point MP (second part of the figure) attains its maximum value at point U.
2) After point K, TP increases but at a decreasing rate. Simultaneously, MP starts falling after reaching its maximum level at point U.
3) When TP curve reaches its maximum and becomes constant at point B, MP becomes zero.
4) When TP starts falling after B, MP becomes negative.
5) MP is derived from TP by: TP MP= Or, MP = TPn-TPn-1
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(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?
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Suppose there are 20 consumers for a good and they have identical demand functions:
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Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?
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