Given are some statements, state them as true or false. Also provide reason for your answer.

1)The study of economics teaches us to deal with the scarcity of resources.

2_The difference between Average total cost and average variable cost reduces with increasing range of output.

3)Price elasticity of demand for an inelastic good is equal to infinity.

4)Average revenue of a producer is equal to price of the good.

Q.No. 2

a.How would you define market equilibrium? How does the economic transactions get affected if there is no equilibrium in the market?

b.Suppose that market for pizza is at equilibrium, and following changes occur in the market, how would the market equilibrium change? Illustrate each condition in a separate diagram and also explain it.

1.Pocket money of the students increases.

2.Price of wheat decreases.

3.Price of burgers decreases.

4.Use of electrical oven reduces the baking time for pizza.

Q.No.3

What is price elasticity of demand? Do you expect the price elasticity of demand for the following goods to be elastic or inelastic? Elaborate your answer.

a.Beef and Chicken

b.Haircare products available in the market.

c.Apple Inc. products.

d.Insulin for diabetes patients.

e.Use of electricity.

Q.No.4

People of Byzantine are producers and consumers of wheat. The market of wheat remains at equilibrium there and can be illustrated with the help of following equations,

P = 50 - 3Q

P = 25 + 2Q

a.What is the equilibrium price and quantity for wheat market? What is maximum willingness to pay of the consumer and minimum acceptable price of the producers for this market? .

b.Do you think this market is organizing the economic activity in a suitable way? Comment. .

c.Now, the government decides to regulate the market with a tax. They decided to impose a tax of $4 on the producers of the market.What effects do you notice in the market after this regulation? What is the new quantity of wheat available in the market? Is there any difference between the price paid by consumers and received by producers? What did the government earn as revenue?

Q.No.5

The basic principles of Economics says, 'You consume something on the cost of another good'.Comment on this statement. Do you agree with it? Why or why not?