# Very Short Questions Spring 2016

The answers to the Very Short Questions Spring 2016 are given below:

1. What is meant by scarcity in economics?

ANS- Scarcity or paucity in economics refers to limitation – limited supplies, components, raw materials, and goods – in an environment with unlimited human wants. It is the fundamental economic problem of having what appears to be limitless human wants in a world with limited resources.

2. Define market supply schedule and curve.

ANS- A supply schedule is a chart that shows output based on the market price per unit, while a supply curve presents the supply schedule’s details using a graph.

3. Define the market equilibrium price and output from the demand and supply functions: Qd = 100-20P and Qs = 10+40P.

ANS- 4. What is the income elasticity of demand?

ANS- The income elasticity of demand is the responsivenesses of the quantity demanded a good to a change in consumer income. It is measured as the ratio of the percentage change in quantity demanded to the percentage change in income.

5. Why is isoquant convex to the origin?

ANS- An isoquant must always be convex to the origin. This is because of the operation of the principle of diminishing marginal rate of technical substitution. MRTS is the rate at which a marginal unit of an input can be substituted for another input making the level of output remain the same.

6. Define economies of scale.

ANS- Economies of scale are the cost advantages that enterprises obtain due to their scale of operation (typically measured by the amount of output produced), with cost per unit of output decreasing which causes scale increasing.

7. Why AR and MR curves are horizontal straight line in perfect competition?

ANS- Perfect competition is a form of the market in which there is a large number of buyers and sellers and where the homogeneous product is sold at a uniform price taker firm means that it has to accept the price as determined by the .forces of market demand and market supply. The firm’s demand curve under perfect competition is a horizontal straight line parallel to X-axis. Under perfect competition, AR is constant for a firm. Hence, AR = MR.

8. Point out the features of oligopoly.

ANS- The three most important characteristics of oligopoly are:

• an industry dominated by a small number of large firms
• firms sell either identical or differentiated products, and
• the industry has significant barriers to entry.

9. What are the elements of gross profit?

ANS- The elements of gross profit are:

• the sales revenue
• cost of sales

10. List out the four causes of wage differentials.

ANS- The four causes of wage differentials are:

• Nature of Employment
• Profitability of Success
• Training and Education
• Security and Stability of Employment

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