%��R!�@N(-E���$$ In this lesson summary review and remind yourself of the key terms and graphs related to a short-run macroeconomic equilibrium. A short-run equilibrium, however, differs from a long-run equilibrium because in the long run the economy must be producing at the potential level of output so that all factors of production are fully employed. Out of this total increase in the income Rs 4000 will be consumed and Rs 5000 be saved. In a perfectly competitive market, a firm cannot change the price of a product by modifying the quantity of its output. Under short run fixed price, equilibrium output and equilibrium demand at fixed price and constant rate of interest can be found with the help of following formulas Y= “A. <> There is relationship between MPC and MPS. endobj same amount every year. Explain the equilibrium level of income, employment and output with saving and investment approach. If in an economy investment increases by Rs 1000 cores to Rs 1200 cores and as a result total income increases by 800 cores calculate capital MPS. IF in an economy the actual level of income is Rs 500crores whereas the full employment the level of income is RS 800 cores. If in an economy MPC is 0.75 and its investment is increased by Rs.500 crores. stream The volume of autonomous investment is same at all level of income. Notes. In the short run a firm under perfect competition is in equilibrium at that output at which marginal cost equals price or Marginal Revenue. 16 0 obj What is the relation between APC and APS? Show on the diagram. <> . Ans. In particular, policy should be deployed in such a way that the short run equilibrium (where prices are sticky) coincides with the medium run equilibrium. x�c```�`��� 2�?� �Ѩ. Suppose that C=40+0.75Y(CONSUMPTION FUNCTION) and I =Rs.60 (investment function)then the equilibrium level of income is obtained as. . The consumption is positive at zero level of income. Candidates who are pursuing in Class 12 are advised to revise the notes from this post. This is known as MPS. Negative saving is nothing but dissaving, this means that at zero level of income there is dissaving of amount -a. = A + bY (A = C + I showing total autonomous expenditure. This will lead to accumulation of more goods with producer .this will make the businessmen to reduce production consequently, output, income & employment will be reduced till the equilibrium level of income. endobj endstream . : if income is Rs 1000 and consumption expenditure is Rs 1200 Y=C+S S=Y-C. Ans. 4 0 obj . Increase in demand beyond full employment causes prices to go up. <> With the help of Class 12 revision notes, students can easily cover the whole economics syllabus in time without any panic during exams. At a fixed price the value of ex-ante aggregate demand for final goods is the sum of ex-ante consumption expenditure C and ex-ante investment expenditure I on final goods. The coefficient ‘b’ measures the slope of consumption. This is equally valid in the long run. Meaning of involuntary unemployment and full employment. endstream 6 0 obj endobj 3 0 obj PROPENSITY TO CONSUME AND PROPENSITY TO SAVE. Given below is the consumption function in an economy C=100+0.10Y. What happens when savings exceeds investment? Consumption function may be represented by an equation. Banker’s Bank. The normal profit short run equilibrium of the monopoly firm is explained, in brief, with the help of the diagrams. we also assume that Aggregate Supply at this cost price is determined by aggregate demand which is known as Effective demand principle. Ex ante is the planned investment which the planner intends to invest at different level of income and employment in the economy. MyCBSEguide provides solved papers, board question papers, revision notes and NCERT solutions for CBSE class 12 Economics. Enter your email address to subscribe to this blog and receive notifications of new posts by email. Short-run According to JM Keynes, ‘A period of time during which level of output is determined exclusively by the level of employment in the economy, is termed as short-run.’ 2. Das (Lecture Notes, DSE) Macro Jan 2-12, 2018 18 / 115 . Equilibrium values of the Price & Quantity in the Money Market: r,M The equations being interdependent, we cannot solve for the equilibrium values of quantities & prices in each market separately. Further, the input and cost conditions are given. Meaning of full employment and involuntary unemployment. There is relationship between APC and APS. <> . endobj Ans. Investment expenditure I =5000, C=100+0.75 is a consumption function (where C= consumption expenditure and Y= N.I) and investment expenditures =1600 on the basis of this information calculate. 196 5.5 Literature notes . CBSE Class 12 Economics Syllabus contains 3 main parts in which the first two parts is about studying the chapter mentioned in the course whereas the 3rd part is project work that needs to be researched and documented to the school as an assignment.. . The corresponding level of saving is -0A. THE GOVERNMENT: FUNCTIONS AND SCOPE 5.1 Components of the Government Budget 5.1.1 The Revenue Account 5.1.2 The Capital Account Find out average propensity to save and average represent to consume. endobj Download CBSE Class 12 Economics Determination Of Income And Employment Notes Set A in pdf, Economics chapter notes, class notes mind maps formulas Revision Notes. endstream AD=AS 2) Planned saving =planned investment. endobj with the help of a numerical example show that in this economy as income increase APC will decrease. APC=C/Y APS=S/Y Propensity to save curve Is drawn from propensity to consume curve When Y=C APC=1 Till that point APS is negative at point‘s’, AS=C+S AS=Y (refers to countries national income). The line AD1 and AD2 correspond to the values of A, via A1 and A2 respectively AS is the 45° line is equal to one. 5 0 obj The level of AD required to achieve full employment equilibrium is called effective demand. Ans. The working of a multiplier can be explained with the help of the following table which is based on the consumption that is, AI=1000 and MPC=4/5. Marginal propensity to save is the ratio of change in saving to change in income MPS=AS/AY. 20 0 obj Figure 2 shows the long-run equilibrium picture for … Each of these notes have been given under the particular chapter, which you can click and read : – Microeconomics Class 12 Notes Autonomous Investments: It is Investment which is made irrespective of level of income. Ac is the consumption curve and OA is the consumption expenditure at zero level of income. 18 0 obj We at BYJU’S furnish the revision notes for Class 12 Economics that assists the students to remember vital points. <>>> Ans. These conditions can vary in the long an… stream l\�K�J ��JAHD��{%���m5EM��p�:R^�`Q�#4��dI�je����H��6 wnC��u�l���1������N�m������������|���y-����>��,�B���� N�c��Z�/,, �E���3�H?�U�L�-�j��B��+������C��:]�.�4\����z�8��w����xi�~X�•�Gs�r��7�[�`Ms���;� Download CBSE Revision Notes for CBSE Class 12 Economics Basic Concepts of Macroeconomics in PDF format. . x���� !��ԝ:Gָ��I��w�Ő�Y�f0�nE��H�bZ�=�L6���@�W�oX��7o��kꦞA��`J����+3� Involuntary unemployment refers to a situation in which people are ready to work at prevailing wage rate, but do not find work. �B��\�1V�Ǝ*����\��&����Oz��b���Y���V&i��u�v�{v�!��-�b33�I�l�h����nA�������e\�餀��X���Cn�'���'�Ԝ��M���3� 4.3 The Short Run Fixed Price Analysis of the Product Market 4.3.1 A Point on the Aggregate Demand Curve 4.3.2 Effects of an Autonomous Change on Equilibrium Demand in the Product Market 4.3.3 The Multiplier Mechanism; 5. This is called as MPC. endobj The value of APS can be negative when the value of consumption exceeds the value of income. At equilibrium point the equilibrium values of output and aggregate demand are OY1 and AD1. The equilibrium income is the level of income where AD=AS i.e….AD=AS and planned saving equals planned investment. In a two sector economy Ad=C+I, AS=Y, Y=C+I. The MC passes through the minimum point of SAC curve and cuts MR at R. The firm decides its output at OQ*. Notify me of follow-up comments by email. <> The value of the multiplier is determined by the MPC. AD = C+I (By substituting the value of consumption function), When final good market is in equilibrium, quantity demanded = quantity supplied AD = AS. Short run fixed price in product market equilibrium output, investment or output multiplier and the multiplier mechanism. . stream Effects of an autonomous change on equilibrium in the product market. <> 1000 crores and consumption expenditure is Rs.750 crores. Even if income is zero consumption cannot be zero. ��� +>�G�:�I��u�ܧC���u]�ﺃLJ���E\�eѽ�����iY���̊�l��wʁ�@X ���F8 1 – b. Y = Value of equilibrium output. because the medium run equilibrium is e cient and the medium run can be understood as a special case of the short run, the policy implications in the short run become immediately clear. Measures to correct excess demand and deficient demand. It means the suppliers are willing to supply whatever amount of goods, consumer will demand at that price. . 11 0 obj . Each firm has a number of factories, farms or mines, as required. . In an economy the MPC is 0.8 Investment is increased by Rs.500 crores. 5000 cores. There is inverse relationship between multiplier and MPS. The syllabus of Economics Class 12 comprises of the following chapters. Each such firm in industry produces a homogeneous product. . Disposable income is Rs. With the help of Notes, candidates can plan their Strategy for particular weaker section of the subject and study hard. Calculate the total increase in income and consumption expenditure. endobj What will be the equilibrium level of income? . The consumption equation shows the level of consumption for various level of income. Unit 3 Class 12 Macroeconomics revision notes majorly cover the crucial topics like: Components of Aggregate Demand. At that level APS will be negative .when the APS is negative APC will be greater than one. <> The price line is tangent to SAC at point C. The firm charges CB price per unit for units of output OB. 9 0 obj Ans. Equilibrium is achieved when planned saving is equal to planned investment that is S=I. 19 0 obj Symbolically: AI^AY^AC^AY. Propensity to save indicates the tendency of the households to save at a given level of income. Here the lists of chapters from different units that are combined together for better evaluation of the subject based … saving at Equilibrium level of N.I Consumption function = 200 + 0.9Y Investment expenditure I=3000. For instance, during the short run, the plant and machinery are regarded as a fixed factor while raw materials and labour are considered as variable factors. Consumption will take place from past savings for survival. APC= ratio of total consumption to total income. . AD and AS together determine the level of income, output and employment. The slope gives the increase in consumption per unit increase in income. . In the short run, leases, contracts, and wage agreements limit a firm's ability to adjust production or wages to maintain a rate of profit. Therefore, the firm can alter the quantity of its output without changing the price of the product. CBSE Class 12 Economics. This can be seen with the help of schedule and a diagram. When income is 0, the economy’s consumption level is OA. . endobj The relationship between consumption and income is called propensity to consume or consumption function. When the short-run equals the long-run The equilibrium level of output Y˜t and the real interest rate Rt lies somewhere on the IS curve. endobj . The short run as a constraint differs from the long run. The short run is a period of time in which the firm can vary its output by changing the variable factors of production in order to earn maximum profits or to incur minimum losses. Designed by expert teachers according to the latest NCERT syllabus, well-explained CBSE Class 12 Economics Revision Notes are available in PDF format on Vedantu's website and app to download online for free. Thus, value of equilibrium output (y) depends on values of A (i.e, c + I) and b i.e AD = AS endobj of output. The MPC=0.75 calculate the increase in investment required to achieve full employment income. Investment multiplier and its mechanism. stream Calculate the total increase in income and consumption expenditure. So -a is the starting point of saving curve. Problems of excess demand and deficient demand. If MPC is 0.9 what is the increase in investment? Join A and B and extend this line to S, AS is the saving curve. e.g. Income minus consumption is saving. endobj C > 0. The marginal propensity to consume is 0.9 calculate total increase income and consumption expenditure, Y=national income) and investment expenditure Rs.2000 .calculate. 12 0 obj Short Run Equilibrium Output so B is another point on saving curve . The value of multiplier depends on the value of marginal propensity to consume (MPC). MPS is positive. x����N�Aй�����Q#{_�b��(`�^�����o��] rrBD!wW��f��'g���,����`v �uGx��cz��ф��)^.�qF�V�9���J��U�E\�x�L`���2��*��5\7}�� m�:����O;��{�r��{�Ǎ2�'�I���7{/��{��[卾�w��l���NO���A/�W�[��{�t~�����B�;�� E��� . Suppose the consumption equals c= 40 + 0.75 y, Investment equals I = Rs 60 and Y= C + I. 100 crores. Short-Run Equilibrium The short-run equilibrium occurs where the Aggregate Demand curve crosses the short-run Aggregate Supply curve. . Question 5. The determination of income and employment in the Keynesian theory depends on the level of AD and AS. The relationship between investment demand and the rate of interest is called investment demand function. Short–run equilibrium output. 400 cr. endobj Revision is certainly a significant factor of self-studying. Learning the important concepts is very important for every student to get better marks in examinations. Equilibrium Output Equilibrium level of output refers to the output at which total desired spending on goods and services (desired aggregate demand) is equal to the actual level of output (Y). Income Determination Important Questions for class 12 economics Short-run Equilibrium Output. Fixed Interest Rate : Interest rate remains constant. Multiplier (k) =Ay/AI. There is direct relationship between k and MPC. autonomous consumption. Net export refers to the difference between export and import. It is derived from the consumption which is as follows: Ans. e.g. x��V�N�@}����]h���-Q$� Ans. APC can be greater than one when the consumption exceeds the income. <>>> Explain with numerical example how an increase in investment in an economy affects the level of consumption. Pages 26 Ratings 100% (1) 1 out of 1 people found this document helpful; This preview shows page 23 - 26 out of 26 pages. Bank. <> Unit 8: Government Budget and the Economy. Figures within brackets indicate the number of questions and figures outside the brackets indicate marks for each question. <> Consumption changes in the same direction as income. . <> APC can be equal to one when APS =0, i.e when consumption = income. It shows the relation between saving and income. We have prepared various notes, relevant for the student of Economics Class 12, who may be studying in CBSE, ISC or as per the NCERT syllabus. �B�T�J�He��rHi�ؐL�'g��� #��3���N9�:�y ���j�#h In figure (16.4), a firm is in the short run equilibrium at point K, where SMC = MR. Find out average propensity to consume, In an economy MPC is 0.75 if investment expenditure is increased by Rs.500 crores. Ans. 1. An increase in investment leads to total rise in national income by Rs. © Copyright 2019 ImperialStudy.com | Site Content Is for Educational Purpose only | All Content Available Free On Internet, Notes of Determination of Income and Employment Class 12 Chapter 4 Economics, Notes Of Money and Banking Class 12 Chapter 3 Economics, Notes of Introduction to Macro Economics Class 12 Chapter 1, Chemistry in Everyday Life Notes for Class 12 Chemistry, Biomolecules Notes for Class 12 Chemistry, Free Entrepreneurship 101 – From Idea to Launch (And Beyond), Free Complete SQL Bootcamp with MySQL, PHP & Python, {100% Free} English Grammar tenses & structures Certification Course, Aldehydes Ketones and Carboxylic Acids Notes for Class 12 Chemistry, Notes for Class 12 Chemistry CBSE Chapterwise Revision, Alcohols Phenols and Ethers Notes for Class 12 Chemistry, Introduction to Economics Notes Class 12 Microeconomics, Propensity to consume and propensity to save. b= marginal propensity to consume due to unit increase in income. Theorems of welfare economics assure us that the competitive equilibrium allocation of resources (and therefore the amount Profit of the firm = 300 Short run equilibrium price =Rs 50. Unit 3: Determination of Income and Employment. The equilibrium level of income is s 300 core and at this point S (100) =i (100) the equilibrium may necessarily not be at the full employment level. . Ans. . = A + by (A = C + I showing total autonomous expenditure), In an economy an increase in investment leads to increase in national income which is three times more than the increase in investment (calculate marginal propensity to consume). Problems of excess demand and deficient demand − measures to correct them - change in government spending, taxes and money supply. • E1F measures the amount of excess demand that emerges in the economy as a result of the increase in autonomous expenditure: The new AD2 intersects the 45° line at point E2 at the new equilibrium output and AD2 have increased by an amount E2G which is greater than the initial increment in autonomous expenditure E1F. Income Determination Important Questions for class 12 economics Short-run Equilibrium Output 1. The above schedule shows equilibrium level of income is 300 where AD=AS 300=300. Class 12 Economics Notes. The concepts should be clear which will help in faster learning. Thus AED always corresponds to the equilibrium level of income / output in the economy This is known as effective demand principle as equilibrium output is determined by the AD ( at a fixed price of final goods and constant rate of interest in the economy) At low level of income saving is negative. Short run Equilibrium Outputwatch more videos athttps://www.tutorialspoint.com/videotutorials/index.htmLecture By: Ms. Madhu Bhatia, … Control of Credit. A = Total Autonomous consumption b = MPC. Some of the important concepts of Unit 2, Class 12 Macroeconomics revision notes are: Bank of issue. . 199 Ans. ����#%B��S��b蚔N The saving function is S= -a+ (1-b) Y.-a represents the intercept term and it represents the amount of savings done when there is zero level of income. Defined as the ratio of change in the income to the change in the investment. Aggregate demand is the total demand of goods and service in the economy. <>/Pattern<>/Font<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 720 540] /Contents 20 0 R/Group<>/Tabs/S/StructParents 1>> 1.2 Price and output in the long run Because there are low barriers to entry in monopolistic competition, the price will be driven down in the long-run to where it equals a point on the ATC curve, so that a –rm is earning zero-economic pro–t. Multiplier tells us what will be the final change in the income, as a result of change in investment. stream 14 0 obj <> When autonomous investment increases the AD1 line shifts upwards and assumes the position AD2. 2. Ex post investment may differ from ex ante investment when the actual sales differ from the planned sales and the firms thus face unplanned addition or reduction of inventories. C=consumption, a =consumption at zero level of income b=MPC (slope of the consumption curve) Y=income. Calculate, Consumption expenditure at Equilibrium level of N.I, From the following information about an economy calculate, its Equilibrium level of national income and. Government consumption expenditure refers to the expenditure incurred by the government on the purchase of goods and services. Change in investment results in the change in income. Average propensity to save is the ratio of saving to income APC=S/Y. Govt. Equilibrium level of income = Rs. 1. Saving is equal to income minus consumption (y=c+s).The saving function relates to the level of savings to the level of income. . The slope of the saving function gives the increase in savings per unit increase in the income. endobj We know that a firm is in equilibrium when its profits are maximum, which relies on the cost and revenue conditions of the firm. Below we provided the Notes of Class 12 for Economics. Under these circumstances equilibrium output will be determined by aggregate demand at this price in the economy. Saving is an increasing function of income. Ans. According to Keynes full employment signifies a level of employment where increase in aggregate demand does not lead to an increase in the level of output and employment. =1000[1/1-4/5] = 1000×5/1=Rs. These cbse revision notes are arranged subject-wise and topic-wise. ... Notes: 1. But, in the long run for a perfectly competition firm to be in equilibrium, besides marginal cost being equal to … The saving is negative at zero level of income because at zero level of income consumption (a) is positive. The value of aggregate demand at output OY1 is Y1F which is greater than the value of output OY1 = Y1E1 by an amount E1F. <> The coefficient (1-b) measures the slope of the saving function. In such a scenario, the prevailing price of a commodity is its equilibrium price. (b) The price is fixed at P in short-run (AR = MR). Draw a hypothetical propensity to consume curve from it draw the propensity curve to save curve, Ans. From it derive a saving curve explaining the process. 17 0 obj <> Equilibrium of the industry happens when the total output of the industry is equal to the total demand. The level of income at which average propensity to consume equal to one. 10 0 obj Investment multiplier is the ratio of change in income to change in investment. Aggregate supply is perfectly elastic at this price. x��TKO�@�[���.4�}�!RH��H���1���&ˁ��u��^=؞�����f�pp�>����q�€g�s!%�!���0�����a�>�2P,�@@�r��ʬy����{@���x}����|^�p� ��ŰlV��΂�YA)�bY:Q(�,���"֠#���Q�ݙ��8ZW�cm6��Gp�>�Y;�޶��sL\L��Nfe���u���km��L�ow�f260;.�- �R�Aq��>u�*. Investment multiplier explains the relationship between increase in investment and the resultant increase in income. It is directly related to MPC. 8 0 obj endobj The equilibrium level of income is determined at a point when AD=AS. 500 crores. endobj Autonomous consumption: The consumption which does not depend upon income. Find i) Equilibrium level of income ii) The level of consumption at equilibrium iii) level of saving at equilibrium. 2. The level of income (Y) Influences the propensity to consume (c) of an economy. Consumption changes by ‘b’ for every one rupee change in income. @v Rψx 2. This unique equilibrium quantity of aggregate output in the PCGE model is called the “natural level of output,” or sometimes ca-pacity output or full-employment output. Aggregate supply is the sum total of consumption expenditure and saving. 15 0 obj <> 1 0 obj Calculate. Determination of income, output and employment is the core of the subject matter of macroeconomics. In the short period, price and rate of interest remaining constant i.e., ex-ante Investment expenditure is uniform i.e. In economic terms, an industry consists of many independent firms. This document is highly rated by Commerce students and has been viewed 32341 times. . The disposable income is Rs.2500 crores and saving is Rs.500 crores. CBSE Class 12 Economics full study material and chapter notes. The sum of total increase in income is also derived as: 1000+4/5 x 1000(4/5)2 x 1000+(4/5)3 x 1 ooo+ infinity. endobj ... _ Short run fixed price in product market equilibrium output, investment or output. . <> Class XII (2012-13) Paper 1 3 Hours 100 Marks Units Periods Marks ... Short–run equilibrium output; investment multiplier and its mechanism. Multiplier also depends on the marginal propensity to save. Given below is the consumption function in an economy C=100 +0.5Y with the help of a numerical example show that in this economy as income increases APS will increase. . equilibrium amount of production. . Meaning of full employment and involuntary unemployment. A level of income at which APS is negative OY. Calculate the total increase in income and consumption expenditure, 11 In an economy investment expenditure increased by Rs.700 crores. : if the income is 1000 and the consumption is 1200, APC =1200/1000=1.20. We know that under competitive conditions, the inter… As a result of increase investment by 125 crores national income increased by 500 crores. The 45° line represents point at which AD and output are equal. . Investment expenditure refers to the expenditure incurred by the private firms and government on the purchase of capital goods such as plant and equipment. . The AD1 line intersects the 45° line at point E1. endobj Equilibrium level of income and output is determined where. Draw a straight line consumption curve. _c= autonomous consumption -a= negative saving (1-b)=MPS. In this article we will discuss about the short run and long run equilibrium of the firm. We say that the short-run equilibrium equals the long-run equilibrium when this equilibrium corresponds to the level of output … %���� Calculate multiplier, MPC and MPS. This process of decrease in output & income will continue until the economy reaches the equilibrium level where AD=AS. endobj Ans: Equilibrium level of income S= I -10 + 0.2y = -3 + 0.1y 0.2y – 0.1y = -3 + 10 0.1y =7 y = 70, Components of equation c=20 + 0.90y explained in % mark question number 1, The schedule for consumption is as follows, C= 20 + 0.9 x 350 + 335 C= 20 + 0.9 x 400 = 380, Under short run fixed price, equilibrium output and equilibrium demand at fixed price and constant rate of interest can be found with the help of following formulas Y= “A, Thus, value of equilibrium output (y) depends on values of A (i.e, c + I) and b i.e AD = AS. Full employment refers to a situation in which no one is unemployed i.e… .there is no involuntary unemployment. . ‘a’ is called intercept and it represents the amount of consumption when there is a zero level of income i.e. In a two sector economy, the saving and investment functions are: Explain the components of the equation C= 20 + 0.90 y and construct a schedule for consumption where income is Rs 200 , Rs 300 , Rs 350 and Rs 400. Download CBSE class 12 Economics study material in PDF format. The level of income at which APC is equal to one is OB. Aggregate Demand (AD): AD = C + I + G + NX Equilibrium Output: Y = AD Or, Y = C + I + G + NX Department of Economics and Foundation Course, R.A.P.C.C.E. In an economy S= -50 +0.5Y is the saving function (where S=saving and Y=national income) and investment expenditure is 7000. . Household consumption expenditure is the expenditure incurred by the household on the purchase of goods and services to satisfy their wants. Given consumption function C=100+0.75 Y (where C=consumption expenditure and, Consumption expenditure at equilibrium level of income, In an economy S= -50+0.5Y is the saving function (where S=saving and Y=national income) and investment expenditure is 9000 calculate, Consumption expenditure at equilibrium level of national income, From the following information about an economy calculate (i) Equilibrium level of N.I (ii) saving at Equilibrium level of income consumption function C=200+0.9Y (where C=consumption expenditure and Y=N.I. 2 0 obj CONTENTS v 5.4 Intertemporal substitution of labor supply . . 1. At OB level of income consumption is equal to income, so saving are zero. Calculate the total increase in income and consumption expenditure. Topics include how to model a short-run macroeconomic equilibrium graphically as well as the relationship between short-run and long-run equilibrium and the business cycle. 13 0 obj Feb 20, 2021 - Chapter 8 - Producer Equilibrium - Chapter Notes, Micro Economics, Class 12 | EduRev Notes is made by best teachers of Commerce. When saving exceeds planned investment means people are consuming less and spending more as a result AD is less than AS. As per the table the initial increase in the investment of Rs 1000 there is a total increase in the income by Rs 5000 given MPC=4/5 . . Ans. (or) AD at the point of equilibrium is called Effective demand. In the short period price is fixed (constant) and elasticity of supply is infinite i.e., supply curve is perfectly elastic. Ans. . Uploaded By yangycharpene. (eD+��RU��@�*25�Z\ʎ֫����}�J��BxRd^����+��6��+��у��܈a���S����g�G�8�z����t�������w���� . Profit = TR – TC = 300- 0 =300 As per the case if the total cost is Rs 1000 then = 300- 1000 = – 700 The firm is earning loss in the short run and It hill stop its production in the long run. 2. In an economy the MPC is 0.95 investment is increased by Rs. . (Or) The amount of consumption expenditure when income is zero. Minimum value of K is when minimum value of MPC=0, the minimum value of K will be unit one. 1. You have entered an incorrect email address! Equilibrium can be achieved at full employment and even at under employment situation. $Ώ]�2�/D���ݺ!����S����|+R�y*B�����I������T��ZR�3��#��VX�jTR#�{|R�A�{��MX��7��Gņ����T���:Q�)�Mvp�O�鸡3X��|N��V�G$��b��t�-�-h���s9���‹+30O�;S�QFC���B�k��R��1�$v�sJ�)7�c�����}F9'���rF�����@g(\�����N7�����G� ���8�Rnᤄw�VX�ZP:�+m μ���b�-��%��R��.6ӂ�d��AӎD�'��Bn�(M�H��5��6$y�� Class 12 CBSE Notes; CBSE Revision Notes. endstream %PDF-1.5 It may not be always at full employment condition in an economy. x���YOSQ`�y !iHB���80*�� *�cE���uB�Tp���'Q��EEQѺ����m����Fi�=g�|��|d�;��������9�L�ߺ��_wD�r;�Χ�҇oin��F|��ڴ��ԡ�\cWS��+d�&V��L�\�D.��`"|:�Α���+�G8)N�S)}��;�z'H�qW�dxw�y�{�Ξ#Ξr�[8��C����u������[���{m%��k���ڶ��V��v���Vؑغ=��6�5��,-[Hs��y3s[���M榍�W4�͍��*�������3��Ul��a˅������-#�K��8�~Q�s��- ��y���dN�S1����$u3�ʆ���cM�y"�j�"�����~�9;��1�����Ɠ�W�߈_P^V�8N��D�JM`�'�j�:d��:����|�pk�;�q�t�n3nY]w� Calculation of APC and MPC given the level of Income and Consumption. stream The firm faces firm specific demand curve D and sets its output where MR MC At. Investment means addition to the stock of capital good, in the nature of structures, equipment or inventory.
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