Q8 of 39 Page 1

(a) The coefficient of price elasticity of demand for Good X is (-) 0.2. If there is a 5% increase in the price of the good, by what percentage will the quantity demand a good fall?

(b) Arrange the following coefficients of price elasticity of demand in ascending order :


OR


How would the demand for a commodity be affected by a change in ‘‘tastes and preferences’’ of the consumers in favor of the commodity? Explain using a diagram.


Elasticity of demand = percentage change in the quantity demanded/ percentage change in the price


-0.2 = percentage change in the quantity demanded/ 5


Percentage change in the quantity demanded = -0.2 * 5 = 1


(b) (-) 3.1, (–) 0.2, (-) 1.1


The following coefficients of price elasticity of demand in


ascending order is:


(–) 3.1, (–) 1 �1, (–) 0.2,


OR


If the taste of preference of consumer changes in favor of the commodity, the demand for the commodity will increase and the demand curve will shift to the right.



Initially, the price is9 OP, the quantity demanded is OQ1. With the change in the taste and preference of the consumer in favor of the commodity, the demand curve shifts to the right from D to D1.. At the same price OP now the consumer would purchase more units of the commodity at OQ2.


More from this chapter

All 39 →
6

Explain the law of diminishing marginal utility, with the help of a hypothetical schedule.

OR


Elaborate the law of demand, with the help of a hypothetical schedule.


 7

The market for a good is in equilibrium. How would an increase in an input price affect the equilibrium price and equilibrium quantity, keeping other factors constant? Explain using a diagram.

 8 A

Note: The following question is for the Visually Impaired Candidates only, in lieu of Q. No. 8 (Alternative) :

How would the demand for a commodity be affected by a change in ‘‘tastes and preferences’’ of the consumers in favor of the commodity?




 9

Which of the following statements are true or false? Give valid reasons in support of your answer.

(a) Average cost curve cuts Average variable cost curve, at its minimum level.


(b) Average product curve and Marginal product curve are ‘U-shaped’ curves.


(c) Under all market conditions, Average revenue and marginal revenue are equal to each other.


(d) Total cost curve and Total variable cost curve are parallel to each other.


OR


Explain a firm’s equilibrium under perfect competition, using a hypothetical schedule.