ECONOMICS ASSIGNMENT

SUBMITTED TO:SIR AZIZ

SUBMITED BY :ASHAHRAB AAMIR

Q1
ANS
A competitive market is one where there are numerous producers that compete
with one another in hopes to provide goods and services we, as consumers, want
and need. In other words, not one single producer can dictate the market. Also,
like producers, not one consumer can dictate the market either. This concept is
also true where price and quantity of goods are concerned. One producer and
one consumer can't decide the price of goods or decide the quantity that will be
produced. The market for wheat is often taken as an example of a competitive
market, because there are many producers, and no individual producer can affect
the market price by increasing or decreasing his output. For this reason, each
farmer takes the market price as predetermined. A wheat farmer doesn't have to
worry about what prices to set for his wheat - if he wants to sell any at all, he has
to sell it at the market price. In other words he is a price taker. The price is pre-
determined as far as he is concerned and all he has to do is to decide on how
much to produce at that price. A perfectly competitive industry is characterized
by many small firms producing the same good under similar cost conditions. In a
perfectly competitive market each firm assumes that the market price is
independent of its own level of output. Thus each firm only has to worry about
how much output it wants to produce. Whatever it ends up producing can be sold
at the going market price. Finally the buyers can costlessly observe prices and can
buy at the lowest price.
Another type of market could be a MONOPOLY A monopoly exists when there’s a
single firm that controls the entire market. The firm and industry are synonymous.
This firm is the sole producer of a product, and there are no close substitutes.
Because there are no alternatives, the firm has the highest level of market power.
Hence, monopolists often reduce output, increase prices and earn more profit

Q2
ANS
A demand schedule is a data table that shows the relationship between consumer
demand and a product's price. When the same data is plotted on a graph, it is
called a demand curve. A demand schedule and demand curve both show the
same data, just in different forms. When you examine the relationship between
quantity and price by looking at the raw data in a table, you're looking at a
demand schedule. When you analyze the same data plotted on a graph, you're
looking at a demand curve. Both a demand schedule and a demand curve follow
the "law of demand," which states that there's an inverse relationship between
price and the quantity demanded

There are multiple reasons for the demand curve sloping downwards such as

1) The law of diminishing the marginal utility

According to this principle, the marginal utility of a commodity reduces when the
quantity of goods is more. Consequently, when the quantity is more, the prices
will fall and demand will increase. Hence, consumers will demand more goods
when prices are less. This is why the demand curve slopes downwards.

2) Substitution effect Consumers often classify various commodities as

substitutes. For example, many Indian consumers may substitute coffee and with
each other for various reasons. When the price of coffee rises, consumers may
switch to buying tea more as it will become relatively cheaper.

Economists refer to this as the substitution effect. Hence, if the price of tea
reduces, its demand will increase and the demand curve will be downward
sloping.

3) Income effect

According to this principle, the real income of people increases when the prices of
commodities reduce. This happens because they spend less in case of falling
prices and end up with more money. With more money, they will, in turn,
purchase more and more. Therefore, the demand increases as prices fall.

4) New buyers

Whenever the price of a commodity decreases, new buyers enter the market and
start purchasing it. This is because they were unable to purchase it when the
prices were high but now they can afford it. Thus, as the price falls, the demand
rises and the demand curve becomes downward sloping.

5) Old buyers

This rule is basically a corollary of the new buyers rule. When the price of a
commodity decreases, the old buyers can afford to buy even more quantities of it.
As a result, this results in demand increasing and the demand curve slopes
downwards.
Q3
AWN
A change in consumers' tastes leads to a shift of the demand curve. If the change
in consumers' tastes leads to an increase in demand, consumers want to buy
more of this good at every price level. A change in price leads to a movement
along the demand curve. Because price is measured on the vertical axis, a change
in the price represents a movement along the demand curve.

A change in price causes a movement along the demand curve. It can either be
contraction (less demand) or expansion/extension. (more demand) A change in
price doesn’t shift the demand curve – we merely move from one point of the
demand curve to another.

This is a movement along the curve

This is a shift among the curve

@4
ANS
An inferior good is an economic term that describes a good whose demand drops
when people's incomes rise. Since harry buys more pumkin juice when his income
declines this proves pumkin juice to be a inferior good The demand curve for an
inferior good shifts out when income decreases and shifts in when income
increases.

Q5
ANS
A supply schedule is a table that shows the quantity supplied at different prices in
the market. A supply curve shows the relationship between quantity supplied and
price on a graph.

A supply curve
A supply curve slopes upward to the right (a positive slope), indicating that the
greater the price buyers are wiling to pay for the product, the greater the quantity
firms will supply.