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ISOQUANT ANALYSIS
In the long run it is possible for a firm to produce the same output using different combinations of two factors of production. For instance it the two factors of production, are capital and labour, then labour may be substituted for capital or vice versa. Thus for instance an output of 69 units of X can be produced by using units of capital and one unit of labour or six units of labour and one unit of capital.
If the various combinations of factors of production which produce the same amount of output are plotted on a graph this produces an isoquant or equal product curve.
Theoretically, we can construct any number of isoquants on the graph to produce an isoquant map. They are downward sloping because although capital can be substituted for labour or vice versa they are not perfect substitutes. Therefore as we substitute capital for labour, for example, it takes more and more units of capital to replace labour, as capital becomes a less and less perfect substitute. Like indifference curves isoquants can never intersect. The slope of the isoquant shows the substitution ratios of the factors of production.
KEYNESIAN AND NEW-KEYNESIAN THEORIES OF UNEMPLOYMENT AND THE BEHAVIOUR OF REAL WAGES As mentioned above, two phenomena about the labour market need to be explained:
Buffer stocks and stabilization funds In this case the government buys up part of the supply when output is excessive, stores this surplus, and resells it to consumers in time
Q. Show Normal profit equilibrium? Normal Profits: With the condition of MC = MR and MC cuts the MR from below, if E is the point of stable equilibrium, output of firm is OM
a. Explain why the demand for a particular brand is more elastic than the demand for all cigarettes. If Lucky Strike raised its price by 1% in 1918, was the price elast
“Managerial economics involves use of economic analysis to make business decisions involving the best use of a firm’s scarce resources” Explain the statement with suitable example.
Supply-side policies Supply-side policies are intended to increase the economy's potential rate of output by increasing the supply of factor inputs, such as labour inputs and
monopoly
Total Cost (TC) This is the sum of fixed costs and variable costs i.e. TC = FC + VC.
what is demand estimation
REGRESSIVE TAX A tax is said to be regressive when its burden falls more heavily on the poor than on the rich. No civilized government imposes a tax like this.
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