Short Answer TypeWhat is meant by 'increase' in supply?
An increase in supply is a shift of the supply curve to the right (e.g. from the initial supply curve to the new supply curve). It means that sellers are willing to supply a greater quantity of goods at the same price level. Otherwise an increase in supply due to favourable factors (like increase in technology, climate etc) other than price of the good. For example, sellers were willing to supply 2 units of goods at a price of Rs150 before the shift, but are willing to supply 6 units of goods at Rs 150 after the shift.
8 units of a good are demanded at a price of Rs. 7 per unit. Price elasticity of demand is (-)1. How many units will be demanded if the price rises to Rs. 8 per unit? Use expenditure approach of price elasticity of demand to answer this question.
Draw average revenue and marginal revenue curves in a single diagram of a firm which can sell more units of a good only by lowering the price of that good. Explain.
Explain the implication of 'freedom of entry and exit to the firms' under perfect competition.
Explain the implication of 'perfect knowledge about market' under perfect competition.
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