Q10 of 30 Page 1

Define production function. Distinguish between short run and long run production functions.

OR


Define cost. Distinguish between fixed and variable costs. Give one example of each.


Production function is the relation between physical input such as labour, capital and physical output of a good. It is expressed in the following form: q = f (x1, x2). It means by using x1 amount of factor 1 and x2 amount of factor 2, you will be able to produce q amount of good.



OR


Costs are the total of expenditure incurred by the producer in producing a good. It includes the cost of factor inputs and non-factor inputs of the production of a good.



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8

What is the maximum price ceiling? Explain its implications.

OR


Explain the chain effects, if the prevailing market price is below the equilibrium price.


 9

Explain the effect of change in prices of related goods on demand for the given good.

 11

A producer supplies 80 units of a good at a price of Rs 10 per unit. Price elasticity of supply is 4. How much will he supply at Rs 9 per unit?

 12

Assuming that no resource is equally efficient in production of all goods, name the curve which shows production potential of the economy. Explain, giving reasons, its properties.