Question

the following three concepts and provide a definition and brief explanation of their importance in microeconomic analysis.

1. Economies of Scope vs. Economies of Scale;
2. Transitivity Assumption of preference orderings;
3. Short-run Expansion Path.

Answer 1

Economies of Scope vs Economies of scale plays a very important role in Microeconomic analysis, both reducing the cost of production for business,while distinguishing both the economies; Economies of scale saves the cost of production beyond a certain point, while Economies of Scope also saves the cost of production if a company produces a variety of products. Economies of scale uses a huge amount of resources since the production happens in bulk, while Economies of scope uses a lot fewer resources because ,under one operation multiple products are produced. Economies of scale is relatively old concept which is used everywhere, While Economies of scope is comparatively new concept & is recently used by businesses. The Economies of scale is about producing one type of product in bulk, while Economies of scope is about producing multiple products under the same operation. Economies of scale depends more on the production capacity of one product, while Economies of scope depends more on the infrastructure of the company to produce multiple products under one head.

Transitivity preferences; is a fundamental principle shared by most major contemporary rational,perceptive & descriptive models of decision making, Which is based on defining a relationship between goods, such as if a consumer prefers good X to good Y ,& prefers good Y to Good Z, than the consumer should prefer good X to good ZZ, Consumer preference Transitivity is a optimal choice which allows the consumer to goods levels of utility or, the total satisfaction of consuming a good or service., preferences assumption is called completeness which is when the consumer does not have indifference between two goods . Transitivity based on relationship between goods,

Short - Run Expansion Path; Expansion path is a curve or a graph with iso quants quantities of two inputs,physical capital & labour,plotted on the axes, increasing the operations with path. The SREP is a horizontal line where the firm is stuck with a fixed amount of capital .It means of increasing the level of expenditure on the inputs,Short Run Expansion Path (SREP) , the minimum cost of increasing output in the Short Run, here in the short run path the minimum cost is more expensive than the minimum cost possible in long run.