Explicit cost is the actual monetary expenditure on inputs like expenditure on raw materials, wages, interest, rent etc.
Whereas Implicit cost is the estimated value of the inputs supplied by the owner of the firm, like imputed salaries of the owner, imputed rent of the building of the owner, imputed interest on the money invested by the owner etc.

(a) National Income (\({ NNP }_{ FC }\)) = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation - Net Imports - Net Indirect Tax - Net Factor Income to Abroad
                                              = 1000 + 200 + 300 - 40 - 80 - (- 20)
                                              = 1520 - 120 = Rs 1400 crore
(b) Gross National Disposable Income = \({ NNP }_{ FC }\) + Net Indirect Tax + Depreciation - Net Current Transfers to Rest of the World
                                                        = 1400 + 80 + 50 -10 = Rs 1520 crore

RS.9000 crore.

(a) \({ GVA }_{ MP }\) by A = Sales by A + Net Change in Stock of A - Intermediate Consumption of A
                            = 500 + 10 - 200 = Rs 310 crore
\({ GVA }_{ MP }\) by B = Sales by B + Net Change in Stock of B - Intermediate Consumption of B
                       = 600 + (- 10) - 300 = Rs 290 crore
\({ GVA }_{ MP }\) by A and B= (310 + 290) crore = Rs 600 crore
(b) National Income (\({ NNP }_{ FC }\)) = \({ GVA }_{ MP }\) by A and B - Indirect Taxes by A and B - Depreciation by A and B + Net Factor Income from Abroad
                                    = 600 - 80 - 30 + 20
                                    = Rs (620 - 110) crore = Rs 510 crore

Money is controlled by the Central Bank of the country as RBI in India. Increase in money supply by the Central Bank leads to increase in liquidity in the economy. Again , increased liquidity causes excess demand for goods and services and if the economy is already operating to its full potential, then it would end up causing inflation.

(a) National Income (\({ NNP }_{ FC }\))
= Private Final Consumption Expenditure + Government Final, Consumption Expenditure + Net Domestic Capital Formation + Net Exports - Net Indirect Taxes - Net Factor Income to Abroad
= 700 + 100 + 120 + (-20)  - 80 -10
= 920 -110 = Rs 810 crore
(b) Gross National Disposable Income
= \({ NNP }_{ FC }\)+ Consumption of Fixed Capital + Net Indirect Taxes - Net Current Transfers to Abroad
= 810 + 60 + 80 - (-10)
= Rs 960 crore

There are two approaches to determine producer's equilibrium:
(i) Marginal Revenue and Marginal Cost approach
(ii) Total Revenue and Total Cost approach
Under Total Revenue and Total Cost approach, it is assumed that a producer would be at equilibrium at a point where he is earning maximum profits. Accordingly, his equilibrium is struck at that level of output, where the difference between Total Revenue and Total Cost is maximum.

Given,
I=100, Y=1200, MPS=0.20
MPC or b=1-MPS=1-0.20=0.80
Y=C+I, or C=Y-I=1200-100=1100
\(C=\overline { C } +bY\)

\(1100=\overline { C } +0.80\times 1200\)

\(\overline { C } \)=1100-960=140

                 \(\therefore \) Autonomous consumption expenditure 

                                       (\(\overline { C } \))=140

Price = Rs.9.

Demand by an individual is the demand of a commodity at different price level at a particular period of time by an individual. An illustrated demand schedule is as follows:
                Individual demand schedule           

Whereas, market demand is the sum of individual's demand price level at a particular period of time by different price level at a particular period of time by different people.
An illustrated market demand schedule is as follows:
                      Market demand schedule

(i) The demand for commodoties having close substitutes is very elastic because if there is an increase in the price of the commodity, their people will start using substitute commodities.
(ii) Items such as toothpaste, needle will have an inelastic demand as consumers spend a small proportion of their income on such items. On the other hand, goods on which the consumers spend a large proportion of their income tend to have elastic demand.

False. Yes indeed the statement is wrong because 'Returns to a variable factor' operates in the short period and not in long period, as stated. In short period, firm cannot vary all the inputs. In order to vary the level of output, the firm can vary only the variable factors, as some factors remain fixed in the short run.

National disposable income is the income from all sources to the residents of a nation for spending on consumption as well as saving during a year. This is the maximum available income for a country for spending. Thus,
Net National Disposable Income = NNP_MP + Net current transfers from the R.O.W.
Gross National Disposable Income=
GNP_MP + Net current transfers from the R.O.W.
Or GNP_MP = NNP_MP + Consumption of fixed capital

The properties of a production possibility curve are:
(a) Downward sloping from left to right: Resources are given and fixed, so increase in production of one commodity is possible only if production of another commodity is reduced.
(b) Concave from the origin: Production possibility curve is concave from the
origin due to increasing marginal opportunity cost.

Factors determining how many units of a good the consumer will buy are:
(a) Its Marginal Utility (b) Its Price
Consumer compares its marginal utility with its price. If marginal utility is more than price, he will continue to buy more, till the point is reached where marginal utility becomes equal to the price.
Following conditions must be satisfied for a consumer to be in equilibrium (getting maximum satisfaction)
(i) MU of a commodity = Price of the commodity, i.e., MU_x = P_x
(ii) MU should decrease with increase in consumption.

Balance of Trade refers to the balance occurring on account of export and import of visible items.Current account balance includes the following:
Current account balance includes the following:
(i) Export and import of goods.
(ii) Export and import of services.
(iii) unilateral transfers from one country to the other. Thus, Balance of tRade is only a component of current account balance.

A product being perfectly homogeneous implies that the products are identical in size, quantity, and quantity.Perfectly homogeneous products are sold in the market at a uniform price.
If even an individual firm tries to charge a higher price, it would lose all its buyers to a large number of other sellers.Hence, they sell homogeneous product at the prevailing market price as decided by the market forces of demand and supply.

The steps involved in the derivation of the saving curve from the consumption
curve are:
(i) We can find savings at different levels of income by taking the vertical distance between the CIS consumption curve (CC)and the 45° line.
(ii) At point B in the diagram income and consumption expenditure are equal Y = C, i.e., savings are zero.
(iii) To the left of point B, CC curve is higher than the 45° line, which denotes income. This implies savings are negative (or Dissaving)to the left of point B, in the diagram.
(iv) To the right of point B, CC curve is lower than the 45° line, this implies C < Y and savings are positive.
(v) By plotting the distance between the CC curve and 45° line at different levels of income just below the upper part we can derive the saving curve SS'. Since the CC curve is a straight line, the derived savings curve \(\rightarrow \) SS, must also be a straight line. For this we are required to locate only 2 points.
(a) Plot a perpendicular <-F)from point Bon the consumption curve, intersecting the OX axis, at point D, which must be on the OX axis, because savings is zero when Y = C.
(b) Plot as on the lower part of OY axis as equal to OC on the Y axis on the upper part. This gives us point S, from where the saving curve will start.
(vi) Joining points Sand Dand extending the straight line upwards we derive the savings curve SDS.

Analysing the effect of a rightward shift of both the demand and supply curves on the equilibrium price and quantity there are three possibilities.
(i) Equilibrium price may remain the same and equilibrium quantity may Increase.
(ii) Equilibrium price may rise and equilibrium quantity may also increase.
(iii) Equilibrium price may fall and equilibrium quantity may also increase.
Now explaining each of these possibilities with the help of suitable diagrams given below:
(i) We observe that if both the demand and supply of commodity increase in the same proportion as shown in Fig. (i) we find that the equilibrium price remains the same at OP but the equilibrium quantity increases from OQ to OQ₁.

(ii) We observe that if both demand and supply of a commodity may increase, but if the increase in demand is more than the increase in supply (Refer Fig. (ii) the equilibrium price increases from OP to OP₁ and equilibrium quantity also rises from OQ to OQ1.

We observe that when both demand and supply of a commodity increase, but if the increase in demand is less than the increase in supply (Refer Fig. (iii) the resultant equilibrium price falls from OP to OP₀ and equilibrium quantity increase from OQ to OQ₁.

 

Consumer's equilibrium with respect to purchase of one good is attained when
(i) the marginal utility of the good is equal to its of the good price.
(ii) MU should decrease with increase in consumption.
Example: Suppose a consumer is buying oranges and the price of each unit of orange is Rs.4. Hypothetical marginal utility schedule of orange is given as:

P_x=MU_x
It is evident from the schedule that the consumer will purchase 4 unts of oranges and reaches an equilibrium position. In this situation, the condition of consumer's equilibrium MU_x (in Rs) = P is satisfied. At this level of consumption, the marginal utility is equal to the price of orange, i.e., 4 = 4.

(a) Rs 1535 crore (b) Rs 65 crore

TU is maximum and constant when MU is zero