1.Explain the law of diminishing returns and its relationship to a bow shaped production possibility frontier....

1.Explain the law of diminishing returns and its relationship to a bow shaped production possibility frontier.

2.Explain Giffen goods and Veblen goods and their similarities and differences in terms of price and income elasticity of demand.

3. Explain the cobweb model.

4.Explain how the elasticity of demand affects the revenue of the seller.

5.Absolute advantage is the most important basis for trade. Do you agree?

6.Explain the differences between absolute and comparative advantage.

7.Explain the relationship between scarcity and opportunity cost.

8.Explain the paradox of value (also known as the diamond-water paradox).

Expert Solution

4. Price elasticity of demand is the responsiveness of charge in quantity demanded due to change in price. In case of elastic demand, change in price results in large change in quantity demanded and thus increase in price leads to fall in revenue.

But when demand in inelastic, increase in price leads to small decrease in quantity demanded but large increase in revenue.

5. Absolute advantage is The total endowment of any particular resource in a country. For example, Middle East countries have large oil reserves. But this is not the best measure

6. Absolute advantage reveals a country's total resource endorwment While comparative advantage reveals comparative quantity of a resource. It makes use of opportunity cost.

For eg, US has large wheat as well as maize reserves. Now to trade, it is important to know whether receipient coinrty is deficient in wheat or not. A country decided to trade in which it has comparartive advantage.

7. In economics, "scarcity refers to - "there are limited resources which have alternate uses. Opportunity cost is the cost of next best alternative which has been forgone

Rahul Sunny answered 1 year ago

explain the Law of diminishing returns.

Consider Chapter 7, the nature of production, and the law of diminishing returns. In that law,...

Consider Chapter 7, the nature of production, and the law of diminishing returns. In that law, we see increasing returns at the start of production, after which production exhibits diminishing returns (increases slowly) until production reaches its peak. Then, production will exhibit negative returns if we attempt to push beyond that. Now, think about your work day - it could be a work day at your place of employment or a work day of school activities or a workday at...

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In that law, we see increasing returns at the start of production, production then exhibits diminishing...

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1.Explain the law of diminishing returns and its relationship to a bow shaped production possibility frontier....

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