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Published on: 23/09/2019
Introductory Microeconomics
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1.
Distinguish between microeconomics and macroeconomics.
2.
Calculate Marginal rate of Technical Substitution from the following PPC schedule.
| Production Possibilities | Production of Good X | Production of Good Y |
| A | 0 | 15 |
| B | 1 | 14 |
| C | 2 | 12v |
| D | 3 | 9 |
| E | 4 | 5 |
| F | 5 | 0 |
3.
What is the slope of PPC? What does is show?
4.
Unemployment is reduced due to the measures taken by the government. State its economic value in the content of Production possibilities Frontier.
5.
How are decision taken by consumer and producers in a market coordinated?
6.
Demand for electricity has 'increased'. however, supply cannot be increased due to lack of resources. Explain how, in any two ways demand for electricity can be decreased
1.
Following are the points of distinction between microeconomics and macroeconomics:
| Basis | Microeconomics | Macroeconomics |
| Scope of the Study | Microeconomics is the study of a particular household, firm, industry, good, individual pnce, wage, income, etc. | Macroeconomics "is the study of economy as a whole or its aggregates such as national Income, level of employment, general pnce level, aggregate demand, aggregatedemand, Ietc. |
| Subject Matter | Microeconomics deals with the price of Individual goods and individual factors of production |
Macroeconomics deals with the general price level. |
| Central Problem | Microeconomics emphasises on the price determination and allocation of resources. | Macroeconomics emphasises on the determination of national income and em 10 ment. |
2.
Marginal Rate of Technical Substitution (MRTS) has been calculated in the schedule delow:
| Production Possibilities | Production of Good X | Production of Good Y | \(MRTS=\frac { \triangle X }{ \triangle Y } \) |
| A | 0 | 15 | - |
| B | 1 | 14 | 1 : 1 |
| C | 2 | 12 | 2 : 1 |
| D | 3 | 9 | 3 : 1 |
| E | 4 | 5 | 4 : 1 |
| F | 5 | 0 | 5 : 1 |
3.
Marginal Rate of Transformation (MRT) is the slope of PPC. A Production Possibilities Curve is concave due to increasing Marginal Rate of Transformation (MRT).
MRT is the rate at which the quantity produced of one good is sacrificed in order to produce one more unit of the other good. Higher level of output of one good can be produced only by reducing the quantity produced of the other good. In other words, as more resources are allocated towards the production of good I, the additional output gets smaller and more of good 2 has to be given up in order to produce the extra output of good I.
4.
production Possibilities Frontier will shift to the right side. Economic value is reflected in terms of increased output and income.
5.
The decision of consumers in the market are expressed through market demand schedule and market demand curve. The decision of producers, on the other hand, are expressed through market supply schedule and market supply curve. The decisions of consumers and producers are coordinated by the interaction of market demand and market supply. This is known as price mechanism.
6.
(i) consumers may be motivated to use energy saving electrical appliances. nowadays, electrical appliances with one to five stars available These electrical appliances with maximum use, consume least electricity.
(ii) consumers may be encouraged to use alternate source of energy such as solar energy, wind energy etc.
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