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Q. Explain about Inventory Economies?
Inventory Economies:Role of inventories is to aid the firm in meeting random changes in the output and the input sides of the operations of the firm. Purpose of inventories is to smooth out the supply of outputs and the supply ofinputs.
Inventories on spare parts, raw materials and finished products increase with the scale of production though they don't increase proportionately with the increase in size of output. Hence as the size of output amplifies the firm can hold smaller percentage of inventories to meet random changes.
Prices of other goods must remain constant Changes in the prices of other goods frequently impinge on the demand for a particular commodity. If prices of commodities for which
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Broader the range of other uses of a commodity, higher the price elasticity of its demand intended for the fall in price though less elastic for the increase in price. As price of
demand function is q=4850 - 5p(1) + 1.5p(2) + 0.1 Y WHEN Y=10000 p(1)=200 p(2)= 100 find income elasticity of demand for p(1)
p=10, TC= 1000+2Q+.01Q^2, Q=?
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