Question

Write short notes on the following concepts;

1. Property right
2. Concave function
3. Diminishing marginal rate of substitution
4. Mixed strategy
5. Contract curve
6. Marginal physical products.

Answer 1

diminishing MRS MRS always changing for a given point on the curve, and mathematically represents the slope of the curve at that point. ... The law of diminishing marginal rates of substitution states that MRS decreases as one moves down the standard convex-shaped curve, which is the indifference curve. it means that as variable on X axis increases MRS decreases.

marginal physical product ... it means the addition in the output by hiring or employing one more unit of an input factor. so the change in output due to an additional input factor is MPP. marginal physical product of labor is + if he adds onto the output, it is 0 if he adds nothing to existing output and is negative if the output reduces are hiring him.

contract curve: the contract curve is the set of points representing final allocations of two goods between two people that could occur as a result of mutually beneficial trading between those people given their initial allocations of the goods. In an Edge worth box the contract curve is the set of tangancy points between the indifference curves of the two consumers. It is termed the contract curve since the outcome of negotiation about trade between two consumers should result in an agreement (a 'contract') that has an outcome on the contract curve.

mixed strategy: A mixed strategy profile induces a probability distribution or lottery over the possible outcomes of the game. A (mixed strategy) Nash equilibrium is a strategy profile with the property that no single player can, by deviating unilaterally to another strategy, induce a lottery that he or she finds strictly preferable. in this a probability is attached to each outcome and thus the payoffs are multiplied with that probability to get the expected payoff for that individual. suppose probability of getting 2 payoffs of 100 and 200 are 0.4 and 0.6 each. thus the expected payoff for the individual is 0.4*100+0.6*200=160