Skip to main content

🎓 New resources added daily! Join over 50,000 students using Padandas

Write any four uses of microeconomics.

Write any four uses of microeconomics.

Solution

Microeconomics has several practical uses, of which four important ones are:

  1. Understanding the market economy: it shows how market forces of demand and supply decide most economic variables largely on their own.
  2. Efficient allocation of resources: it shows how consumers and producers allocate limited resources to maximise satisfaction and output.
  3. Tools for economic policies: it provides the analytical basis for policies on tax, price, demand and production.
  4. Business decision-making: managers use it for pricing, resource allocation, production and demand forecasting.

Explore more questions

  1. 1.

    Consider the following demand schedule:

    Points: A B C D E
    Income (RS): 10000 20000 30000 40000 50000
    Demand (Units): 200 400 600 800 1000

    a) Compute the income elasticity of demand at movement from B to D and D to B by proportion method

    b) Compute the income elasticity of demand at midway between B and D and D and B by arc method. Why is arc method considered as more appropriate method than proportion method?

    c) How do firm use price elasticity of demand in business decision making? Explain with suitable examples.

    Long question Asked in 2080 (15 marks)
  2. 2.

    How are the price and the output determined under monopoly in short run? Is monopoly price is always higher than competitive price? Give reasons.

    Asked in 2080 (15 marks)
  3. 3.

    Explain the income effect for inferior and normal goods.

    Asked in 2080 (15 marks)
  4. 4.

    Consider the following cost schedule:

    Q: 1 2 3 4 5 6 7 8
    AFC: 100 50 33.3 25 20 16.7 14.3 12.5
    AVC: 10 9 8 8 10 13.3 17.7 22.5
    AC: 110 59 41.3 33 30 30 32 35

    a) Graph AFC, AVC and AC and explain their behavior.

    b) Is the trend of AC is influenced by law of variable proportions? Explain

    Long question Asked in 2080 (10 marks)
  5. 5.

    Consider the following production schedule:

    Labour (L) 0 1 2 3 4 5 6 7
    TPL 0 20 48 78 104 120 120 98

    a. Compute APL and MPL

    b. Graph TPL APL and MPL and explain three stages of production with proper reasons

    Asked in 2080 (10 marks)
  6. 6.

    Derive shortrun supply curve of a competitive firm.

    Asked in 2080 (10 marks)