Allocation of resources is assumed to be theoretically most
efficient when,
1.
AC =
AR
2.
MC =
MR
3.
AC
is minimum
4.
MC = price
AC
Average cost (unit cost) is equivalent
to total cost (TC)
divided by the numbers of unit of a product produced’ (quantity Q):
AC= TC/Q
MC
Marginal
cost is the extra cost obtained in the production of one additional unit of a
good and service.
MC = change in cost/change in
quantity
All resources are fit in a most
efficient way when MC= price
In case price of a good decrease and negative effect of income outweigh
positive effect of substitution, the good is known as:
1.
Substitutes
goods
2.
Inferior
goods
3.
Giffen goods
4.
public
goods
Substitutes
good are closed replacement for one another. For example pepsi and coca
cola are closed substitutes.
Inferior goods always related
to income. Income effect is negative in these goods. Due to increase in income
demand for these goods decrease, for example the income of a teacher is 20000;
within its income he purchases goods for home like vegetables. If income
increase from 20000 to 30000, than he purchases chichkn. Vegetables are
inferior good. Inferior goods are different for different families as regard to
their class. The demand curve for inferior goods is upwards slop.
Giffen goods always related
to price. When price increase then demand for these goods also increase and
vice versa. Giffen goods are opposite to the law of demand and its curve is
positively sloped.
Public goods are goods that are commonly available to all populace within a
society and community such as education, air, hospitals and roads etc.
When interest
rates fall?
1.
Investment
falls
2.
Bound price rice
3.
MEC
decline
4.
People
save more
When interest rate is fall then
bowering is easy so investment increase and demand of bound will be increase
due to this price of a bound also increase.
Marginal efficiency of capital (MEC) will rice when interest rate
fall.
Due to fall in interest rate people save less.
The Economic-system
in which private or public sectors are present together is known as,
1.
Capitalism’
2.
Islamic-economic-system
3.
Mixed-economy
4.
Socialism’
In Capitalism, private sector exists and there is poor become poorer and rich
become richer.
In socialism, public sectors exist and there is no right to individual
ownerships.
In mixed
economy, public sector + private sector
Oligopoly’ is a
market form in which there presents:
1.
Single-firm
2.
Two-firms
3.
Few-firms
4.
Many-firms
Monopoly= Single-Firm
Duopoly= Two-Firms
Oligopoly = Few-Firms
Perfect competition= Many-Firms
The Market-value of all finishing goods’ and services’ produced yearly
with domestic-resources is known as,
1.
GNP
2.
NNP
3.
GDP
4.
National-income
Goods = visible (the things you can see or touch)
Services = invisible (services of teacher, doctors etc)
Domestic
resources = home country resources
GNP is the sum of value of all final goods and services produced’ by a
country citizen in a specified period (financial-year, start from 1 July to 31
Jun) including earnings earned by citizen from out of the country.
NNP= GNP- depreciation allowances (wear and tear expenditures)
GDP is the sum of value of all final goods and services produced’ by a
country citizen in a given period (within boundaries).
A curve that indicates
negative association between inflation’ and un-employment is called:
1.
Indifference-curve
2.
Phillips-curve
3.
Laffer-curve
4.
Demand-curve
Inflation is rice in
prices
Indifference curve
shows various com-bination of dual goods which shows same satisfaction level.
Phillips curve presented by
A.W Phillips which shows inflation and unemployment have a stable and inverse
relation.
The Laffer curve is a supply-side theory presented
by Arthur-Laffer to explain the association between tax-rates and the
amount of tax-revenue collected by governments’.
The point of Break even of competitive firms
occurs when:
1.
Price = ATC
2.
Price = AVC
3.
Price = AFC
4.
Price < ATC
At this point there is no profit or loss and in
other words, you “break even” after that point business will be shut down. Shut
down point is where price less than ATC.
Price = marginal cost
If function of consumption run along the 45-line, function
of saving will,
1.
Lie-along-45-line
2.
Lie-along-vertical-axis
3.
Lie-along-horizontal-axis
4.
Be-negative
Consumption function and saving function are
presented by Keynes.
MPC: “The marginal propensity to consume may
be defined as the ratio of consumption expenditure to any
particular level of income”. Consumption is a function of income.
MPS: “The marginal propensity to save may
be defined as the ratio of saving to any particular level of
income”. Saving is a function of income.
In this figure, if consumption functions run along
the 45-line, saving-function will lie along horizontal axis.
When line of consumption is lie above then 45
line, than saving negative.
When line of consumption is cross the 45 line,
than saving zero and consumption equal to income at that point.
When line of consumption is lies below then 45
line, than saving positive.
If MPC “marginal propensity to consume” is 0.75,
the multiplier value is,
1.
5
2.
4
3.
3
4.
2
Multiplier effect is money folded many times.
Consumption Multiplier = 1/1-MPC = 1/1-0.75 =
1/0.25 = 4
Saving multiplier = 1/1-MPS