Q11 of 25 Page 1

(a) Identify the market form and explain the corresponding feature, as given in the following statement: ‘The commodity in this market has attributes which are identical for sellers and buyers.’’

(b) Define Price Floor. State the likely consequence of this type of intervention by the government.


(a) Perfect Competiton


In perfect competition, the products are standardized as they are either identical or homogenous. the price of products is also the same in the entire market.


(b) the Price floor is a price that is controlled by the government. It assigns the minimum price at which goods and services are to be sold by the companies.


a. Its aim is to increase companies’ interest in manufacturing the product and increase the overall supply in the market place.


b. The price that is generally higher or lower than the equilibrium price is determined as per the demand and the supply.


c. It is imposed when the supply of certain products is low, resulting in an increase in prices.


The implication is that the price floor protects the workers' rights and boosts employment. At times the price floor is set in such a way to encourage farmers to produce certain crops.


More from this chapter

All 25 →
9

Discuss briefly the meaning of ‘‘Price discrimination’’ and ‘‘Product differentiation’’ with the help of suitable examples.

OR


Is a firm under perfect competition a price taker, or a price maker?Justify your answer.


 10

Suppose a consumer whose budget is <500, wants to consume only two goods, Good X and Good Y. The goods are respectively priced at <50 and <25.

Answer the following questions based on the given information :


(a) State the budget equation of the consumer.


(b) What is the slope of the budget line?


(c) How many units can she purchase if she spends the entire <500 on Good X?


(d) How many units can she purchase if she spends the entire <500on Good Y, given that the price of good Y has doubled?


OR


‘‘For a consumer to be in equilibrium position, marginal rate of substitution between the two goods must be equal to the ratio of prices of


the two goods.'' Do you agree with the given statement? Justify your answer.


 12

(a) Why is the short run Marginal Cost curve U-shaped ?

(b) Explain the relation between Average Cost (AC) curve and Marginal Cost (MC) curve using the diagram.


 12

Note: The following question is for the Visually Impaired Candidates only, in lieu of Q. No. 12(b) :

Explain the relation between Average Cost (AC) and Marginal Cost (MC).