Homework Answers

Consider a consumer who consumes two goods, X and Y. Show the impact of fall in price

of good Y on the consumption of good Y (i) if good Y is an inferior good (ii) good Y is a Giffen

good.

Draw the marginal-cost and average-total-cost curves for a typical firm. Explain why the

curves have the shapes that they do and why they cross where they do.

Using ordinal approach show the consumer equilibrium. How will a change in income

affect the consumer equilibrium if x is an inferior good and Y normal good (use X good on

horizontal axis and Y on Vertical axis).

Explain the relationship between average product and average cost curve?

Suppose the government removes a tax on buyers of a good and levies a tax of the same size

on sellers of the good. How does this change in tax policy affect the price that buyers pay sellers

for this good including the tax, the amount sellers receive net of the tax, and the quantity of the

good sold?

Qd = 90 – 6P

Qs = - 20 + 4P

Calculate consumer surplus and producer surplus at the equilibrium price?

“A world wide drought will increase the total revenue earned by the farmers staying in 

Haryana. However, a drought in Haryana will reduce their total revenue.” Explain.

what role does the elasticity plays in determining dead-weight-loss of tax?

Define production possibility frontier (PPF)? Why is the PPF concave to origin? Do all

the points on the PPF represent efficient level of output? Explain.

If the government allows Indians to import and export textiles, what will happen to the price

of textiles and the quantity of textiles sold in the domestic textile market?