Lesson-2 on Economics

Question: What is Elasticity of Demand?

Answer:

 It can be defined as the percentage change in quantity demand due to % change in price.

Ø Price Elasticity of demand

Ø Income  Elasticity of demand

Ø Cross Elasticity of demand

Question:  What is Price Elasticity of Demand?

Answer:

The price elasticity of demand measures the responsiveness of quantity demanded to a change in price, with all other factors held constant.

It is calculated as:

Price Elasticity of Demand = (% Change in Quantity Demanded) ÷ (% Change in Price)

Question: What is Income Elasticity of Demand?

Answer :

Income elasticity of demand measures the responsiveness of the demand for a good to a change in the income of the people demanding the good.
It is calculated as:

Income Elasticity of Demand =  (% Change in Quantity Demanded) ÷(% Change in Income).

Question: What is Cross Elasticity of Demand?

Answer:

The Cross-Price Elasticity of Demand measures the rate of response of quantity demanded of one good, due to a price change of another good
It is calculated as:
Cross Elasticity of Demand = (% Change in Quantity Demand for Good X)÷(% Change in Price for Good Y)

Question: What is Inferior goods ?

Answer:

Ø Goods that have negative income elasticity of demand

Ø Due to increase in income demand for a particular product decreases

Ø It violets laws demand due to change in income.

Question: What is Difference between Economic cost & Accounting Cost?

Answer:

Economic Costs

The monetary value of all inputs used in a particular business over a period of time.

Accounting Cost

The explicit costs of operating a business i.e., purchase of inputs.

Question:  What is Variable costs?

Answer:

Cost that varies with output.

Question:  What is Fixed costs?

Answer:

Costs that don’t changes with the changes in outputs within a relevant range.

Question:  What is Marginal Cost ?

Answer:

It is the extra cost for producing or selling an additional unit of goods.

Question:  Marginal Revenue/Profit

Answer:

Extra revenue or profit obtained by selling an additional unit of a goods.

Question: What Does Dumping Mean?

Answer:

 In international trade, this occurs when one country exports a significant amount of goods to another country at prices much lower than in the domestic market.

•  The motive may be to enhance revenue, off-load surplus stocks / capturing foreign markets.

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