E_d = 1

E_d = \(\infty\)

\(\Delta P = 9-10 =-1, \Delta Q = 18-18=0\)
Percentage Change in Quantity Demanded
= \(\frac{\Delta Q}{Q}\times 100\) 
= \(\frac{0}{18}\times100\) = 0 
Percentage change in Price
       = \(\frac{\Delta P}{P}\times 100=\frac{1}{100}\times 100 \)= Rs.10
\(E_d=\frac{Percentage \ \ Change \ \ in \ \ Quantity \ \ Demanded}{Percentage \ \ Change \ \ in \ \ Price}\)
\(=\frac{0}{10}=0\)
\( E_d=0\) (Perfectly inelastic demand)

(i) False When there is underutilisation or inefficient utilisation of resources, the economy will produce at a point inside the Production Possibility Curve.
(ii) False Massive unemployment does not cause a shift in the Production Possibility Curve but causes the economy to operate at a point inside the Production Possibility Curve.
(iii) True A Production Possibility Curve is drawn by assuming given resources and technology constant.  With these assumptions, the economy can operate at a point on Production Possibility Curve but not beyond it.

The main reason for an economic problem are:
(i) Scarce resources.
(ii) Wants are unlimited and recurring in nature.
(iii) Alternative uses of resources.

It is the problem which is concerned with the distribution of income among all factors of production like wages to the labour, rent to the land, interest to the capital and profit to the entrepreneur. e.g. in a country like India where disparity of income is high, the government employs its resources for production of those goods which are socially desirable like railways, rather than on the production of high-end cars like Ferrari.

This is very correct to say that only scarce goods are high in price.  This can be supported by the water, diamond paradox.  Though water is very useful for all living being, however, it is very low priced as it is available in plenty.  On the other hand, diamond which is not so useful is still very high in price due to its relative scarcity.

Economics is concerned with the study of economic problems at the level of an economy as a whole, on one side and on the other, it is concerned with the study of an individual too. The subject matter of economics is studied under two broad branches viz microeconomics and macroeconomics.
Vital theories or studies of microeconomics are:
(i) Theory of consumer behaviour.
(ii) Theory of price.
(iii) Theory of producer behaviour.
Vital theories or studies of macroeconomics are:
(i)Theory related to equilibrium level of output and employment.
(ii) Theory related to inflationary and deflationary gap in the economy.
(iii) Theory of multiplier.
(iv) Study of government budget.
(v) Study of exchange rate and Balance of Payments (BoP).

an outward shift

diminishing opportunity cost

(i) (0, 0), (0, 1), (0, 2), (0, 3), (0, 4)
    (1,0), (1, 1), (1, 2), (1, 3)
    (2, 0), (2, 1), (2, 2)
    (3, 0), (3, 1)
    (4, 0)
(ii) (0,4), (1, 3), (2, 2), (3, 1), (4, 0)

The equation of the budget line is:
(i) P_x.X + P_y.Y = M, where P_x and P_y are the respective prices of the two goods X and Y.
∴ 4 x 5Y = 20
(ii) If the given consumer spends her entire income (Rs.20) on' the good 1, whose price is Rs.4 per unit, It means that she can buy buy 5 units i..e. \(20\over 4\)= 5 units of good 1
iii) If she spends her entire income on the good 2, whose price is Rs.5 per unit, it means that she can buy 4 units i.e.\(20\over 50\)4 units of good 2.
iv) The slope of the budget line\(={\Delta Y\over \Delta X}\)
or \(=-{P_x\over P_Y}=-{4\over 5}\)

Given: e_D=(-1)

\(e_D={\Delta q\over \Delta p}\times{p\over q}\)
\((-)1={\Delta q\over(-)2}\times{10\over 20}\)
\(\Rightarrow (-1)={\Delta q\over(-)4}\Rightarrow \Delta q=4\)
New quantity demanded \(=q+\Delta q-=2+4=24\)units

Given:

\(e_D={\Delta q\over \Delta p}\times{p\over q}\)
\(e_D={-5\over 1}\times{4\over 25}=-0.80\)
\(e_D < 1\)

Opportunity cost of opening a school here is opening a community centre. He should choose to open a school because it provides maximum social welfare by educating the students whose productive efficiency will there by increase in future.

MOC or MRT is defined as the addition made to the cost in terms of number of units of a good sacrificed to produce one more unit of the other goods.
                                       Schedule

In the given schedule, there are five combinations. Combination A depicts none of X and all of Y and combination E denotes nothing of Y is produced and all resources are utilised to produce Y. In combination B, to produce 1 unit of X, one unit of Y is sacrificed. In this way we observe that to have one more unit of X, 1Y, 2Y's, 3Y's and 4Y's are sacrificed respectively. This shows the increasing rate of sacrifice or MOC.

A production possibility curve depicts different combinations of two commodities that an economy can produce with fuller and efficient utilisation of given scarce resources. On the basis of the given diagram, as we move downwards from point A to B, B to C, and so on, (assuming full and efficient employment of resources), the PPC must be concave, because the marginal rate of transformation (MRT) increases continuously as more and more of one good is produced at the cost of reducing the amount of the other good

(i) National income is a subject matter of macroeconomics because it studies the determination of the income at an aggregate level.
(ii) Price determination of a commodity is the subject matter of microeconomics because it deals with the behaviour of an individual commodity.
(iii) General price level is studied in macroeconomics as it deals with the price as an aggregate.

(i) The demand for a commodity and unfavourable change in taste of the buyer are inversely related to each other. When there is an unfavourable change in taste of the buyer for the commodity, the demand for the commodity
falls at the same price and as a result the demand curve shifts to the left.The given diagram shows the effect In the diagram, demand curve of X is shown by the DD curve. With an unfavourable change in taste of the buyer for the commodity, the demand of good X, falls from OQ to OQo at the same price OP. The demand curve shifts leftward from DD to D₀D₀.

(ii) The demand for an inferior good and change in the income of the buyers are inversely related to each other. When there is a fall in the income of the buyer, the demand for the inferior good rises and as a result, the demand curve shifts to the right.The given diagram shows the effect.
In the diagram, demand curve of X (inferior good) is shown by DD curve. With a fall in the income of the buyer, the demand of inferior goods rises from OQ to OQ₁ at the same price OP. The demand curve shifts rightward from DD to D₁D₁.

Decrease in demand. Decrease in demand is due to change in factors other than price of the given good, e.g., decrease in income, unfavourable change in tastes etc.
Decrease in quantity demanded. Decrease in quantity demanded is'due to rise in own price of the given commodity.
Two causes of decrease in demand are:
(i) Fall in the price of substitute goods. The demand for a good falls with the fall in the price of its substitute good. As a result the demand curve for the commodity shifts to the left with the fall in the price of its substitute good.
(ii) Rise in the price of the complementary good.
Py ↑{Dy↓} Dx↓
As a result, there is a decrease in the demand.

Assuming that the given consumer consumes only two goods X and Y.Further the income of the consumer and the prices of the two goods, are also assumed to be given. Now for the given consumer to be in equilibrium under the utility analysis two conditions must be fulfilled:
(a) MU of last unit of money (rupee) spent on each good is the same.
(b) MU of a good falls as more of it is consumed.
(i) Let the two goods be X and Y, their prices be Px and Py and their MU's as MUx and MUy- The equilibrium condition is: \({MU_X\over P_X}={MU_Y\over P_Y}=MU\)  of the last unit of money (rupee) spent on each good.In case\({MU_X\over P_X}>{MU_Y\over P_Y}\) this implies that MU from the last rupees penton X is greater than MU of the last "rupee spent on Y. This will induce the given consumer to transfer expenditure from Y to X, i.e., consumption of X rises and V's falls. As a result, MUx falls and MUy rises.This transfer of expenditure continues till \({MU_X\over P_X}={MU_Y\over P_Y}\) and the given consumer gets the same MU per rupee.
MU of a good falls as more of it is consumed. This condition is nothing but the assumption that the Law of Diminishing MU is in operation.Suppose \({MU_X\over P_X}>{MU_Y\over P_Y}\) the given consumer will continue to transfer expenditure from Y to X till expenditure on Y is reduced to zero, and the entire income of the given consumer is spent on X.This implies that the given consumer consumes only one good, which is highly unrealistic.As a matter of fact, he spends his income on many goods.Thus, for the fulfillment of the first condition, it is also necessary to that the law of Diminishing MU is in operation.

Consumer equilibrium is defined as the level of consumption where the consumer derives maximum satisfaction from the consumption of commodities and does not have any desire to change from that level of consumption.
The consumer will continue to substitute Y for X as long as the marginal rate of substitution is greater than or equal to the price ratio of both the commodities.The necessity of this condition can be explained with the help of the
given diagram.In the given diagram IC₁, IC₂ and IC₃ represent the indifference map for the consumer representing the consumer's scale of preferences. AB represents the budget line which shows various combinations of the
two commodities that a consumer can purchase from his given income and price of the commodities. Consumer equilibrium is achieved at point E where the budget line is tangential to the indifference curve.

(i).If Marginal Rate of Substitution is greater than the price ratio or market rate of exchange: This is represented by point D in the given diagram.When the marginal rate of substitution is greater than the market rate of exchange then it would represent that the consumer is willing to sacrifice in a higher proportion as compared to the price ratio or market rate of exchange. Hence, the consumer becomes ready to consume more of X by sacrificing Y. Due to increase in consumption of X, the MRS between X and Y will fall. This process continues till the level where the marginal rate of substitution becomes equal to the market rate of exchange.
(ii).Similarly, if MRS is less than the price ratio, then the consumer will become ready to consume less of X. Due to decrease in consumption of X, the MRS between X and Y will increase. This process continues till the level where MRS becomes equal to the market rate of exchange.
Hence, the consumer will be at equilibrium, i.e., the consumer's behaviour will be stable only if the marginal rate of substitution becomes equal to market rate of exchange.
No, the equality of MRS to price ratio or market rate of exchange is not enough to achieve equilibrium. The diminishing marginal rate of substitution or convexity of indifference curve is also a necessary condition to achieve equilibrium. In fact it is a necessary condition in order to achieve a unique equilibrium point for the consumer.

Consumer equilibrium is defined as the level of consumption where the consumer derives maximum satisfaction from the consumption of commodities and does not have any desire to change from that level of consumption.
The consumer will continue to substitute Y for X as long as the marginal rate of substitution is greater than or equal to the price ratio of both the commodities.The necessity of this condition can be explained with the help of the
given diagram.In the given diagram IC₁, IC₂ and IC₃ represent the indifference map for the consumer representing the consumer's scale of preferences. AB represents the budget line which shows various combinations of the
two commodities that a consumer can purchase from his given income and price of the commodities. Consumer equilibrium is achieved at point E where the budget line is tangential to the indifference curve.

(i).If Marginal Rate of Substitution is greater than the price ratio or market rate of exchange: This is represented by point D in the given diagram.When the marginal rate of substitution is greater than the market rate of exchange then it would represent that the consumer is willing to sacrifice in a higher proportion as compared to the price ratio or market rate of exchange. Hence, the consumer becomes ready to consume more of X by sacrificing Y. Due to increase in consumption of X, the MRS between X and Y will fall. This process continues till the level where the marginal rate of substitution becomes equal to the market rate of exchange.
(ii).Similarly, if MRS is less than the price ratio, then the consumer will become ready to consume less of X. Due to decrease in consumption of X, the MRS between X and Y will increase. This process continues till the level where MRS becomes equal to the market rate of exchange.
Hence, the consumer will be at equilibrium, i.e., the consumer's behaviour will be stable only if the marginal rate of substitution becomes equal to market rate of exchange.
No, the equality of MRS to price ratio or market rate of exchange is not enough to achieve equilibrium. The diminishing marginal rate of substitution or convexity of indifference curve is also a necessary condition to achieve equilibrium. In fact it is a necessary condition in order to achieve a unique equilibrium point for the consumer.

Consumer equilibrium is defined as the level of consumption where the consumer derives maximum satisfaction from the consumption of commodities and does not have any desire to change from that level of consumption.
The consumer will continue to substitute Y for X as long as the marginal rate of substitution is greater than or equal to the price ratio of both the commodities.The necessity of this condition can be explained with the help of the
given diagram.In the given diagram IC₁, IC₂ and IC₃ represent the indifference map for the consumer representing the consumer's scale of preferences. AB represents the budget line which shows various combinations of the
two commodities that a consumer can purchase from his given income and price of the commodities. Consumer equilibrium is achieved at point E where the budget line is tangential to the indifference curve.

(i).If Marginal Rate of Substitution is greater than the price ratio or market rate of exchange: This is represented by point D in the given diagram.When the marginal rate of substitution is greater than the market rate of exchange then it would represent that the consumer is willing to sacrifice in a higher proportion as compared to the price ratio or market rate of exchange. Hence, the consumer becomes ready to consume more of X by sacrificing Y. Due to increase in consumption of X, the MRS between X and Y will fall. This process continues till the level where the marginal rate of substitution becomes equal to the market rate of exchange.
(ii).Similarly, if MRS is less than the price ratio, then the consumer will become ready to consume less of X. Due to decrease in consumption of X, the MRS between X and Y will increase. This process continues till the level where MRS becomes equal to the market rate of exchange.
Hence, the consumer will be at equilibrium, i.e., the consumer's behaviour will be stable only if the marginal rate of substitution becomes equal to market rate of exchange.
No, the equality of MRS to price ratio or market rate of exchange is not enough to achieve equilibrium. The diminishing marginal rate of substitution or convexity of indifference curve is also a necessary condition to achieve equilibrium. In fact it is a necessary condition in order to achieve a unique equilibrium point for the consumer.