Short Answer Type8 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.
Here the price elasticity of demand is (-1). In unitary elastic, quantity demanded changes by exactly the same percentage as price does.
Here number of units initially demanded is 8 @ Rs 7 per unit.
Total price =8*7 = 56 Rs
If the price rise to Rs 8 per unit with a price elasticity of -1, the quantity demanded will be 56/8 = 7 units.
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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