2(III-VIII)

III.

IV.

V.

OPEC:

VI.

VII.
VIII.

17/2012-13

(Inputs)

(Output)

II

III

Unit of Variable

Total Product

Marginal Product

Average Product

input (Labour)
1

15

15

15

60

45

30

123

63

41

200

77

50

285

85

57

372

87

62

455

83

65

530

75

66

596

66

66

10

640

44

64

11

660

20

60

12

660

Zero

55

13

650

10

Q
K

TP

Marginal Produt

Total Product

E
O

F
O

D
MP

TP
A

(derivatives)MPquadrant
OCTP
AB
TP
ABB
CDMP
B
5

OF (=OD)

AC

AB
CD

IV

(Returns scale)

I
II
III

x
A
B
C
ABC
IsoquantIsoproduct

isoquant
6


K
6
A
B

Capital

C
2

4
Labour

A
C
BABC

A, B, C
(locus)

K

A
B

P1
O

(smooth)P1 A, B, C

P1

BA
7

B
CB
A
A
B
C
D

BC
ADA
D

A
B
C

C
A

K
x
400

x
300

14
x
200

10

P
D

x
100

Capital

12

C
B

6
A
4
2

8 10 12 14
Labour

4K
+ 6L6K + 9L
8

100x200x4K + 6L8K + 12L

100x300x

AOEOD
BOLORAB
(=EL=AH)(=DR=HB)
AHHBAHHB

(MRTS)
MRTS

AB
AB

+

K

B
C

P1
O

P1
B

P1

C
P1

P1
9

RS
OROS

P1
OAOB

(kinked)P1
A, BCA, BC

TPMP

C
E

D
B

P
B

AA
(=OC)
PBB

PAB
10


(irrational)ABCDA
B

AB

A
A

A
B

A
A

B
B

D
O

B'
L

B
L

K.MPk = L. MP1

Y-X-

YXK/L
(numerator)(denominator)

K.MPk
= L.MP1MPkMP1

K.MPk = L.MP1

K/L = MP1/MPk

Y-
X-
CA = DBAC = BD

11

AC = BD, DB < CA

AC = BDDB > CA

12

P1RSBDCA
(=CA)(=BD)

P1
TPA

P1P1P1
X-Y-

P1BC(LM
= BN)OLOMOROS
= RS = NCBNNC
P1
P1

P1
(MRS)

MRS
MRS

K/L+(factorintensity)P1BY-CoordinateXCoordinateOL/OR
OA, OBOC
A
A

13

K
P1
S
R

C
Total Output

C
Total Output

P1

T
d

B
D
Labour

B
D
Labour

II

K
0x
50

x
200

Capital

0x
40

x
300

H
F

K
K'

A'

C D

B' C' D' C'

Labour

D'

OP

(K)
KK

14

E
F
K
KKEBOP
KK

<

>

R
Y
P

Output

D'

B A

C B' A'

C'

Unit of composite input

OAOAOD OD
OR

15

ODODOBOB

OD
ODOCOC

(multiple)x, 2x, 3x
OP,

OP
(OA = AB = BC = CD)OP

K
5x

4x
2x

Capital

3x

E
D
C

1x

B
A

Labour

OP

K
6x

5x

P
4x
3x

Capital

Capital

5x

4x

B
3x

2x

1x

D
C

1x

F
E

2x

Labour

16

Labour

(ED < CD < BC < AB)

P
x)
00
P( 2

x)
50
P( 1

2K
00)
P (1

1L

2L

x x
LLK
x

30
0

20
0x

18
0x
0x
10

Capital

15

2K

0x

C
B

1L

2L

17

Labour

EP
L

LKCP
D

Capital

x)
00
P( 3

2L

2K
x)
00
P( 1

x)
00
P( 1

4L
Labour

x)
00
P( 2

)
00x
P( 3
)
00x
P( 2
x)
75
P( 1

4K

C
D

L
O

2L

18

VI

(Revenue)(Cost)

= RC
R = Px.X,XxPxxPx

19

K
A''

A
A'

C
D

P4

M
P3
P2
P1

B'

B''

= LPx.X C PxC
X

P1 Pk(=C)
OAOBAB
CD
OA = C/PkOB = C/P1ABOA/OB
OAOBC/PkC/P1ABOA/
OB = C/Pk + C/P1 = C/PkxI/C = P1Px

ABAB
AB

AOB
AB
P2
MP2P2
MOK*OL*

20

= RC
= Px.XC

Y
A4
A3

Capital

A2
A1
K*
K

P*
O

L* B1 B2 B3 B4
Labour

Px(X)C
CC

ML*K*
P*

MRSlk = P1/Pk
MRSlk
MRS1k = K/LK
L

MRSlk = K/L = P1/Pk

K.Pk = L.P1
21


L, P1 > K.Pk
L, P1 < K.Pk

E1

E2
A
A'

B'

LP.LK
P.KP-
P* = 2V.PoPoV
V = O,V = 1,
V > 1
V < 1OE1
OE2K/L
AB
AB
Y-
OE2OE1OE2OE1

22


OE

K
E

X-
X-

M3
A
Capital

M2
P
M1

K
P2

P1

L1

L2

Labour

OEM1, M2M3M1K
OL1P1
KP2KKP2
OL2AB
P2M2
P2
NP2KK
23

XY
LK

Y
P
A
C
B

PPXY

yxAB
yCExDF
PPyx
yxMRTy,x
YxPP

MRTxY
MRTy
x
x
24

MRT
PP
PP

Y
A'
A
A"
C

B"

B'

AB Y-A
YX-BX
CAB
(=Px/Py)ABAB
AB

Y
A4
A3
A2
A1
C'

P
B 1 B2 B3 B4

25

M
A1B1
A2B2A3B3M
A4B4M
A3B3PPPPA3B3

>, =<

26

27

(Total Revenue-TR)(Total
CostTC)(TR)(TC)
(TR)
(TCs)
(TR)(TC)

MR > MC MR < MC

Marginal
28

RevenueMR
Marginal CostMC(MR)(MC)
(MC)(MR)
(MR
> MC)(MC > MR)
(MC = MR)
(MC > MR)

VI

MR = MC MC > MR

(MC = MR)

>
(MC > MR)

MC MR

MC, AC, TCAR, MR, TR

VI

SECTION I

29

 (Entrepreneur)
VIII

30

31


Px

AVC

TVC

TFC

TC

TR

Loss

1.

100

100

100

2.

50

100

150

40

110

3.

50

100

150

50

100

4.

50

100

150

60

90

Px
AVC
VC
TFC
TC
TR
Loss TCTR

(Price > AVC but < AC)

32

(Price > AVC < AC)

(AC)

(AVC)

(AC)

TC = TFC + TVC

(Total Cos)
(Total Cost
TC)(TC)(Total
Fixed CostTFC)(Total Variable CostTVC)

+
(TC = TFC + TVC)
AC = AFC + AVC

(Average CostAC)

33


+
(AC = TC + Number of units produced)

+
(TC = TFC + TVC)

(AFC = TFC Number of units produced)

(AVC = TVC Number of units produced)

+
(AC = AFC + AVC)

(TFC)

(TFC)
=
(AFC) =
(TVC) =
(AVC) =
(AC)
=

10000
10000 100 = 100
5000
5000 100 = 50

100+50

= 150

(Marginal CostMC)
(TC)(MC)

n(MCn), n(TCn)(n 1)(TCn)

n= n (n 1)
MCn = TCn TCn1

34

MCn = TCnTCn1

(Marginal Fixed
CostMFC)(MC)(MFC)
(MVC)
(Marginal Variable CostMVC)
MCn = MVCn

=+
(MC = MFC + MVC)

(MFC) =
(MC) =(MVC)

AC MC, AC

(AC)(MC)
(TC)

(150x 100 + 251 = 15251 101 = 151)

(150x100 + 49 = 15049 101 = 149)

(150x100 + 150 = 15150 101 = 150)

35

(N + 1)

(N + 1)

(N + 1)

1.

10.0

10.0

9.0

10.0

9.5

2.

9.5

19.0

8.0

27.0

9.0

3.

9.0

27.0

7.0

34.0

8.5

4.

8.5

34.0

6.0

40.0

8.0

5.

8.0

40.0

8.0

48.0

8.0

6.

8.0

48.0

8.0

59.0

8.0

7.

8.0

56.0

8.0

64.0

8.0

8.

8.0

64.0

8.0

72.0

8.0

9.

9.0

72.0

18.0

90.0

9.0

10.

9.0

90.0

20.0

110.0

10.0

11.

10.0

110.0

22.0

132.0

11.0

12.

11.0

132.0

24.0

156.0

12.0

(N + 1)N
(N + 1)
(N + 1)N(N + 1)
(N + 1)N
(N + 1)
AC MC

(AFC)
AC MC AC MC
AFC
36


(AFC)

(AFC)

K

AFC

AFC
A
O

UNITS OF OUTPUT

AFCX TFC

OABC, ODEF, OHKL

x (TFC)
OABCOC XOA
(TFC)
(TFC)
(AVC)

(plant)

37

(Law of Diminishing Returns or the Law of Variable Proportions)

(Marginal Physical Product)

MPAP

38

AP

AP/MP

MP

A
O

UNITS OF LABOUR
EMPLOYED

XY
OAMPOAMP
PMPAPAP
AP MP AC MC

MPAPAP MPAP
AP = MPAPMPAP AP
AP Q PMP
MP APMP
APAP P MP AP
MP>APAP P

MP

39

(TVC)
(MVC)(TVC)
(MVC)(TVC)

(1)

(2)

(3)

(4)

(5 = 2 3)

(6)

(7)

1.

100

50

50

2.00

50

2.00

2.

200

110

55

1.82

60

1.67

3.

300

174

58

1.72

64

1.56

4.

400

236

59

1.69

62

1.61

5.

500

285

57

1.75

49

2.04

40

AB(AP)(MP)
(AVC)(MVC)

F16.A
P

AP/MP

MP

A
O
Y

UNITS OF VARIABLE
FACTOR EMPLOYED

AVC/MVC

MVC

F16.B
AVC

Q
P

A
O

AP

OUTPUT

B
x

7.3 (A)
7.3 (B)

41

 AP7.3 AAVC 7.3 B

APAVCAP
AVC
APAVCMPMVC

AVC MVC U

(MVC)

U
U7.3 (B)AVC
MVCAVCMVC
AVC
MVCAVCAVCMVC

+
(AC)

(AFC)
(AVC)

1.

100

00

100

40

40

40

140

40

140

2.

100

00

50

70

30

35

170

30

85

3.

100

00

33.3

90

20

30

190

20

63.3

4.

100

00

25

136

46

34

236

46

59

5.

100

00

20

200

64

40

300

64

60

6.

100

00

16.7

300

100

50

400

100

66.7

7.

100

00

14.3

434

134

62

534

134

76.3

42

(MC)
(MVC)(AC),(AFC)(AVC)
(MC)(AC)

(AFC)(AVC)
(AC)
AVC MVC AC U

Y

AFC

Fig. A

AFC

A
O
Y

B
x

OUTPUT
MC

Fig 16.B

AC
AVC

AVC/AC/MC

OUTPUT

MVC MC MC = MVC

(AC)


OA
AFCAVC

OAAVC

ACAB
AC
43

 AC

AV

OB AC
MCACAC
(MC = AC),PAC

ACPMCAC
AC

U
(AVC)(MVC)U
(AC)(MC)UMC
MVCACAVC
(AFC)
SECTION II

(Long Run Cost Curve)

(Long run cost)

(Long-run total cost-LTC)

(Long-run Average Cost-LAC)
(Long-run Marginal Cost-LMC)
(Long-run total cost-LTC) :
(TFC)(TVC)(STC)
(LTC)
(The long run total cost is the minimum cost at which each level of output can be produced.)

44


STC

LTC

oq
Q
y ykxr

Total Cost

STC

mRiknu

Q
OUTPUT

(The long run total cost of production (LTC) is the least possible cost of producing
any given level of output when all inputs are variable- Leibhafasky)

(Locus)

(i)(ii)
(Least cost factor proportion)


LTC STC
LTC

oq
Q
y ykxr

Total Cost

mRiknu

Output

(Least Costs)
(Tangent)
STC1STC2
(LTC)
(Tangent)LTCSTC
(Envelope)
(LTC)S (Inverse S)

45

(i) oOY

(ii) LTC
(iii)
(Long Run Average Cost Curve-LAC or Envelope Curve) :

(LAC)
(The long-run average
cost curve (LAC) is that curve which shows the minimum cost per unit of producing each output
level, corresponding to different scales of productivity-Mansfield)

LAC

(SAC)
(LAC)
SAC1
SAC2

Y
SAC1
A

SAC2

Total Cost

oq
Q
y ykxr

LAC

N
OUTPUT

mRiknu

SAC1 SAC2
OM
OMBM SAC1OM
AMON
46

ONCN
ONDN

(LAC) OM
(SAC1)ON(SAC2)

SAC1 SAC

oq
Q
y ykxr

Total Cost

SAC1
SAC2
LAC
SAC3

mRiknu

Q OUTPUT

(LAC)
M
(point of tangency)
M(LAC)(negative)
(SAC)
MM
M

(Point
of Tangency)
(The
lowest point on each SAC curve, however, may not be the point of tangency with the LAC curve.
The lowest point on an SAC Curve is tangent to the LAC Curve only at the lowest point of the LAC
Curve. - Holland).M(optimum use)

(LAC)

(The long-run average cost curve is a planning curve, in the sense that it is a guide to the
entrepreneur in his decision to plan the future expansion of his output.- Kautsoyiannis)

(LAC) U-
U
LACLAC
LAC(Constant)LAC
(economies)(diseconomies)U-
47

 (Economies of Scale) :LAC

(i) (Division and Specialisation of Labour)

(ii) (Economies of indivisibility) (J.S. Bain)

(iii) (Technical economies)

(Diseconomies of Scale)

(co-ordination)(diseconomies
of scale)

(Long Run Marginal Cost)

Total Cost

oq
Q
y ykxr

LMC

mRiknu

OUTPUT

48


(Long run marginal cost is the
addition to total cost attributable to an additional unit of output when all inputs are operationally
adjusted.- Ferguson)

LMC

(i) (Relation between Long run and Short run

Marginal Cost)

(Envelope)(LMC)
(SMC)SMCSAC(LAC)
(Tangent)

Total Cost

SMC
LMC
SAC

oq
Q
y ykxr

mRiknu

Q OUTPUT

LAC

OQSMCLMC
OQSMCLMC
OQSMCLMC
(LMC)(SMC)(flatter)
(iii) Relation between LMC and LAC)LMC
LACLMCLAC
LACLMCLACPLMC
LMCLAC
P SAC = SMC = LAC = LMC
(Deriving Lon-Run Marginal Cost Curve)

49


(slope)

SMC 3
LAC

oq
Q
y ykxr

Total Cost

SAC1
LMC3
SMC1
K
H
SMC2 SAC2
M

mRiknu B Output C
nh?kZ
d kyhu l hekUr ykxr o dh O
;q
Rifk
A

LAC
OA
LACHSAC1
OASAC1
SMC1SAC1LAC
HSMC1N
OAAN
OBLACQ
QLACSAC2
QSMC2OB
QOBOC
M
LACSAC3M
SMC3KOCCK
OCKN, QK
LMC
(Technical Change : The Very Long Run)

(positive)MPL
(output generate)

(Iso-cost Line)
50

(Least Cost Combination)

MPL/PL = MPK/PK

(Innovation)

(Schumpeter)(exponent)
(economic
signals)

(change response)

(manufacturing)

(comptitiveness)

(endogenous)

(response)

51

15001550

n n n (n 1)

n= n (n 1)
MRn = TRnTR(n1)

AR MR AC MC

982110020 = 2058
2000=58

1022110020
= 21422000 = 142

1002110020 = 21002000 = 100

AR

52

AR MR

53

(PRICE) AR

A
O

QUANTITY SOLD

DDOAOBOCOL
OD(OD=AE=BF=CH=LK)

54

AR MR

55

AR MR

56

AR/MR

P1

AR
MR
A

QUANTITY SOLD

OPOAOE
OP OP1OAOABP
OEOECP1
AECF
XPP1FBX

MR = TR

57

AR MR

Y

AR(PRICE)/MR

C
F
B
AR

MR
A
O

QUANTITY SOLD

OAACAB
58

ODDFDE

SECTION III

MC = MR
MC > MR

MC

AR/MR

R
AR/MR

QUANTITY SOLD

MC > MR

59


QRQ

RR

R
>

MC MR AR

MC

Y

PRICE

P4
C

P3

P2
P1

OUT PUT

60

AR/MR 4
AR/MR 3
AR/MR 2
AR/MR 1

Q1 Q2 Q3 Q4

OP1OQ1
OP2OQ2
OP3OP4
OQ3OQ4

AR/MR MC

Fig. B

Fig. A

PRICE

MC
P

AR/MA

D1
S
O

QUANTITY DEMANDED/SUPPLIED
(IN MILLIONS)

OUTPUT (IN THOUSANDS)

ASS1
DD1BOP(=BA)
OA

BOAQ
OA

61



'U'

AR/MR

O
OUTPUT

AV
C

MC
AC

O
X

(FIG. C)

AC

M
C
AV
C

Ar/MR-AC/MC

(FIG. B)

AV
C

(FIG. A)
M
C
AC

AR/MR

E L

A
OUTPUT

O
X

A
OUTPUT

A
AFABBF
PFBD
BPDBF(=OP=AF)
(AB)BFC

F
MC AR/MC

BAF
ALLF
BFOA

62

AB

63

FIG.A
Y

FIG.B
S1

AC
S3

Q1

P1

MC

S2

Q1

P1

P2

Q2

P2

PRICE

Q2

AR/MR2

S
P3

P3

Q3

Q3

AR/MR3

S
D

S
O

AR/MR1

A1

A2

A3

QUANTITY DEMANDED/SUPPLIED
(IN MILLIONS)

A3
OUTPUT

A2

A1
x

AR/MR U AC
A
BOP1
B

SS1
7.12 ASS2SS2DD
Q2OP2OA2
OP1OP2AR/MR1
BAR/MR2MCQ2
64

Q2
(=OP2)

A
SS3OP3OP3
BAR/MR3UACQ3
Q3

S2
S1

PRICE

PRICE

Q2

P2
P1

AV

AR/MR 2

P2
P1
Q2

Q1

AR/MR 1

Q1
S

Y
M
AC C

D
A2

A1

QUANTITY DEMANDED/SUPPLIED
(IN MILLIONS)

A1

A2

OUTPUT
(In thousands)

AR/MR
AC
OP1BQ1
(=A1Q1)(=A1B)

SS1A
AR/MR

A
SS2OP2BAR/
MR2UQ2Q2

65

(Long run supply curve)
(i) (Long run supply curve of a firm)

LMC = MR
= LAC = AR(Normal profit)

Long run supply curve of firm is that portion of its marginal cost curve
that lies above the minimum point of its average cost curve.
Y
LMC
Total Cost

LAC

P
AR=MR

Q OUTPUT

(ii) (Long run supply curve of an Industry)

(lateral summation)
(i)
(ii) (economies and diseconomies)
(LMC)

(Long run optimal production)(N)

SL = Q X N
SL =
Q =
N =

66




(constant cost industry)

(Horizontal straight
line)

Y
Total Cost

SS

SS
C

P2

P1

dd
dd
O

Q
OUTPUT

A OP1OQ

OP1OQ1
dd1dd2SS1OP2
C
OQ2

SS1SS2Bdd2SS2

B
SL
(Horizontal straight line)

67

 (Increasing Cost Industry)

SS1

SS2

P2

P3

P1

S1

dd2

dd1
O

Q1

Q2

Q3

(i)dd1dd2(ii)(iii)
(iv)

SS1SS2

BBA

AC2MC2

BOP1E2

ABSL

(decreasing cost industry)

68

D2

D1

S1

P2

S2

P1

C
P3

S1

Q1

Q2

Q3

OP3
AB

>

69

A
AV C
C

AR/MR-AC/MC

MC

E
A

AR

MR
Q

OUTPUT

AR/MR-AC/MC

AV
C

MC

AC

MCMRAOQ
OPEPBC
(= OP)(= QC)
MCMR

E
P

A
AR

MR

Q
OUTPUT

AMCMR
PEBCOP (= QB)(=QC)BC

70

(The Allocative Inefficiency of Monopoly)

(Deadweight Loss of Monopoly)

MCM= MCC
R

PM
PC

EC

AR C
MRC

EM
ARM

MRM
O

QM

QC

ARCMCCEC
PCQC
ARMMRMEM
PMQM
PMRSPC
R EM EC
RSEC
RSSECS EM EC
SEC

71

R EM EC

U
>

AV
C

AV AC
C

MC

AR/MR-AC/MC

MC

AC

(Fig. B)
(Fig. A)

C
B

E
P

B
R

C
AR
R

AR

MR
O

Q
OUTPUT

MR
OUTPUT

MCMRRA
PEBC
(=QC)(=QB)B
PEBCOP (=QC)(=QB)

AR MR

72

ARU
AR

7.17

(Fig. B)

AV
C

AR/MR-AC/MC

E
R

MC

AV AC
C

AR/MR-AC/MC

MC

AC

(Fig. A)
Y

AR

R
AR

MR
O

Q
OUTPUT

MR

O
OUTPUT

AR MR
APECB
AR
BB

AC

AR
ARMRAR
U

AR MR
AR/MR
ARAR
73

MRAR
ARMR

MCMR
ARMRMC = MR (=AR)
AR

ARMR

(1) MC = MR(2) AC = AR
ARMRMC = MR
= AR = ACAR

(1) MC = MR
(2) AC = ARMRARMCAC
ACMC
AC

(Excess Capacity)

(Excess Capacity)

74

Y
LA C

LM C

R
M

MR

Q1

AR

LMC = MR, EOQ

OQ1LACQQ1
(Excess Capacity)ARU

(Is Excess
Capacity Wasteful)

U
(Excess Capacity
Theorem)

(Kelwin Lancaster)

75


(Consumer and Producer Theory in Action)

(OPEC)

AVCMC

(1)
(2)
(3)
(1)

MC

S1

SAC

S11

MC

E
1500

1500
E'

1200

E"

900

900
S

SAC

1200

D
S1

S11

20

25

30

76

100

125

'A' 'B' 200

E 1500
20 200 1500 100
MC MC1 SAC SAC1
S1 S1 E1 1200
25 100 125

S11 S11
E11 900 100
30 200 300

(Changes in Technology)

(One time technological change)

AC<ARAC

AR <
AVC
(Continous Technical Change)

AVC AR AVC AR

AC

MC

MC

MC

AC
AC
AVC

AVC
E
P

AR
P
MR

P
E

AVC
AR
P
MR

SHUTDOWN
POINT

PO

AR
P
MR

X O

X O
Q

77

E1 OP OQ1 AC> AR AVC

AR OPO
AVC
OP OQ2
AC2 > AR AVC2< AR AC1 AVC3<AR

(Effect of Taxes on Price & Output)

1. (Per unit tan)

(a) (Unit tax) (b) (Ad Valorem tax)
2. (Lump sum tan)
3. (Tanes on Profit)
1.
(a) E
OP OQ 't' E1 MS
S'E1 OP1
OQ1 OQ1 E1M
MS

S
t

E
P
P

M
S

(b) D
OPO OQO D1
OP1 OQ1
OP11 P1P11
OPO

78


S1 OPO
OQO OQ2

Y
S
P
S
P
P
D
P
D

2.
'E' OPO OQO

SE OP1
OQ1

Y
S
E
P

3.

79

OPEC :
(OPEC: A Case Stury of a Cartel)
(Organisation of Patroleum Exporting Countries) OPEC 1960 5

(a)
(b)
1973 13 70% 80% 87%
OPEC OPEC
400%

Sw OPw OPEC
SN OPEC Pw
OQO oq1 OPEC q1q0/OPEC OPEC
S1w P1w
OPEC OQ2 OPEC q2q3 OPEC
OPEC OPEC
OPEC 1980 OPEC

1. OPEC
OPEC

SN
EW
Y

PW
PW

SW
D

O
q

80

2.
3.
4. OPEC

OPEC
1.
2.
3.
4.
(Principal Agent Theory)

(dividend)

(Non-Maximising Theories)

(Satisfactory)

81

1920

82

(Pareto Optimality)

(MC)

1.1
a b

(P=MC)

83

P=MC

11

P>MC

1.
2.
3.

4.

5.

6.
7. P#MC

(Cartels)
(Oligopolists)

U.K.

U.K.

1980 U.K.

84

(P=SMC)

(ATC) MC<ATC

AR = AC

U.K.
OFTEL OFGAS OFWAT

(Oligopoly)

U.K. 1945 1980

USA

(i)
(ii)

(iii)

(iv)

85


BT,
1996

1990 1991

W.T.O.

86

(Monopoly and Oligopoly)

87

(Marginal
Revenue Product)

MRP
MRP

(Marginal Product)

(Marginal Physical Product)

MPP
MPP

(MP)

(MRP)

88


(MRP)

(MRP) (1)
(2)
(MPP)
(MR) (MRP) = (MPP)
(MR)
(MPP)
(MPP)

(Value of Marginal ProductVMP)

VMP = MPP AR

=

(MRP) (VMP)
MRP = MPP MR VMP = MPP AR
MPP MPP
MR AR

(AR) (MR)
MRP (=MPP MR) VMP (MPP AR) AR MR
MRP VMP
MR AR
MRP (MPP MR) VMP = (MPP AR)
MR AR
MRP VMP MRP
VMP

(1)
MRP (MPP MR) = VMP (MPP AR) MR = AR
(2)
MRP (MPP MR) < VMP (MPP AR) MR<AR

89

MPP

MRP (= 220100
200 100) = 20 100= 2000 VMP (MPP AR) (20 100)

98
MRP 220 98 200 100 = 1560) VMP (MPP AR)20 98 =1960
MPP VMP
MPP = 20

(MPP) (=20 98 = 1960)

MRP 1960 400 = 1560

MRP VMP

MRPVMP(=98
20 = 1960)
(MRP)
MRP MPP MR
MRP M
PP MR
MPP MPP

MPP

8.1

8.1

()
90

MPP 8.1

MPP/AFP

M PP

APP

A
B
UNITS OF LABOUR EMPLOYED

8.1 MPP OA
APP (OB
APP MPP

MPP MRP
MPP MPP

MR AR
MPP MPP
MRP 8.2 8.1 MPP MRP

MPP/AFP

MRP/VMP

A
B
UNITS OF LABOUR EMPLOYED

91


MRP MPP MRP
MRP VMP

MR AR
VMP MPP
MPP MPP
MR, AR MRP VMP
8.3
VMP MRP
8.2 VMP MRP

Y
C
MPP/AFP

MRP
O

A
UNITS OF FACTOR EMPLOYED

8.2
(MPP)

VMP

AR

TR

MRP

VMP

AR

TR

MRP

VMP

92


1. MPP =
2. TR = AR
3. MRP =
4. VMP = MPP AR
8.2
(1)

(2) MRP VMP

(3) MRP VMP

MRP
MRP

MFC (Marginal Factor Cost) = MRP

=

...(1)

AFCMFC

AFC = MRP

...(2)

Y
W

a
b

MRP/WAGE RATE

W1

W2

W3

MRP
O

UNITS OF FACTOR DEMANDED

MRP
MRP MRP
93


MFC =
AFC) MRP 8.4

OA a MRP
OW OA OB b MRP OW1,
OW1 OB OW2
OC MRP

MRP
MRP

MRP
MRP

MRP

MRP

MRP
8.5



Y
D

MRP/WAGE RATE

W1

W2

MRP1
MRP 2
MRP 3
D
O

UNITS OF FACTOR DEMANDED

94

OW a OA
OW OW1

MRP
8.5 MRP1 MRPs MRP2 OW2
b OW2 MRP2
MRP3 c
MRP
a, b, c, d,
DD

MRP MFC

MFC AFC
MFC MRP AFC MRP

MFC AFC

MFC AFC
MFC AFC AFC MRP
MFC AFC
MRP

95

96

A

Y

S
S
FACTOR PRICE

PRIE

W4

W3
W2

W3
W2
W1

O
A

A
B
C
QUANTITY OF FACTOR SUPPLIED

UNITS OF LABOUR SUPPLIED

A OW1 OW2 OW2 OA OC OD

W2

W2
W2 W4
OD OB

8.6 B
97

Y
S

WAVE FAT

W3
W2
W1
S

QUANTITY OF LABOUR SUPPLIED

SS SS

OW1 OA
OW2 OB
OW2 OC

98

AFC

Y
D

D
D

D
FACTOR PRICE

FACTOR PRICE

FACTOR PRICE

D
D

D3
D2
O

D3
D1

D1
S
UNITS OF FACTOR SUPPLIED CRORES

D2

D2

D3
S
X

UNITS OF FACTOR SUPPLIED

(IN HUNDREDS)

D1
UNITS OF FACTOR SUPPLIED
(IN THOUSANDS)

A
B
C

99

I
I

1.1
1.1
Y

WAGE RATE

W1

C
P

W
W2

N
L

AFC/MFC

S
VMP/MRP
O

QUANTITY OF FACTOR DEMANDED/SUPPLIED

(IN CRORES)

ARP

QUANTITY OF FACTOR DEMANDED/SUPPLIED

(IN HUNDREDS)

A P
AP (=OW) OA OW
A OW1
BC
OW2
HF

B
(
A
MRP MRP VMP
100

MRP VMP1

MRP VMP
MRP
B OA MRP
L ARP LM
WLMN

MRP

MRP

MRP ARP

MRP ARP ARP MRP

ARP MRP ARP
ARP
1.2

Y

Y
D

WAGE RATE

C
AFC/MFC

F
S
D
VMP/MRP ARP
O

QUANTITY OF FACTOR DEMANDED/SUPPLIED

(IN HUNDREDS)

QUANTITY OF FACTOR DEMANDED/SUPPLIED

(IN CRORES)

1.2 B

101

ARP MRP
ARP
MRP ARP

1.3
S

V
B
W
W1

WAGE RATE MRP

MRP
MR

QUANTITY OF LABOUR DEMANDED SUPPLIED

MRP

= 99 51 100 50)

MRP
1.3 H
102

F
MRP AB
DF(= OA)
(OD)
(AB > DF)
(OA < OD)

(AFC)

MFCAFC

(MFC) (= 100 51 100 50) MRP

MFC AFC MFC MRP
AFC MRP
1.4
MFC AFC MRP
E E MFC MRP
OA OW (OW1)
(=OB) (MRP ) AFC F

MFC AFC

WAGE RATE MRP

E
F

W1
W

MRP

QUANTITY OF LABOUR DEMANDED SUPPLIED

103

MRP
(MR)
AFC
AFC MR
AFC (MFC) (AFC)
MFC MRP
1.5

MFC

AFC

MRP/WAGE RATE

D
W
E

W1

MRP
MR
O

B A

QUANTITY OF LABOUR DEMANDED/ SUPPLIED

1.5 AFC
MR MRP

AFC MR E OW
OA MFC MRP
MFC MRP MFC AFC
MFC MRP D OW1
OB OW
OA OW1 OB

104

(VMP) (MPP) (AR)

AFC = VMP (MPP AR)

= (= )

(MRP) (MPP)
(MR)

MPR = MPP MR
= MRP

(MPP)
MPP MPP
MRP
MRP MRP

(MRP)

(MFC) 50
51 2000 2100

MRP MFC MRP MFC

MFC MRP
105

MFC
MRP MFC
MRC

MFC
MRP X,
Y Z
MFCx = MRPx
MFCy = MRPy
MFCz = MRPz

MFC MRP
MRP MFC MRPx/MFCx = MRPy/MFCy = MRPz/MEPz
MRPx/ MFCx
MRP MRPx/MFCx MRPy, / MFCy, MRPz/ MFCz
MRP
(MRP MFC

MRP
MRP X
Y Z
MRPz : MRPx : MRPz = MFCz: MFCx: MFCz

MRPy
MRPx
MRPz

MFCx MFC y MFCz

AFC = VMP (= MPP AR)

= (= )
MFCMRP
AFC= VMP
MFC = MRP

(1) MFC = MRP (MPP MR)

(2) AFC = VMP (= MPP AR)

106

MFC = AFC
MRP = VMP

MRP VMP
(AR) (MR)
MRP VMP (MPP)
MRP VMP

MRP = VMP
MFC = AFC

MFC AFC MFC AFC
(MFC) (AFC)

MFC MFC (= 100

51 100 50) (AFC)

1.6

SWAGE RATEWMP/MRP

B
W

AFC/MFC

VMP
MRP

QUANTITY OF LABOUR DEMANDED/ SUPPLIED

VMP
MRP VMP
VMP 8.14
8.14 AFC/MFC B MRP B
AB VMP
107

MRP VMP

MFC
MFC
(51 101 50 100) (101 )
MFC AFC
VMP 8.15
VMP MRP
8.15 C MFC MRP
AB VMP MRP
VMP

(VMP)



MFC

MRP/VMP/WAGE RATE

AFC

C
D

W1
W

VMP/MRP

QUANTITY OF LABOUR DEMANDED/ SUPPLIED

VMP, MRP

108

(VMP)
MFC MRP
MFC MRP

VMP

MRP VMP

MRP VMP

MRP VMP
VMP MRP

MRP VMP

MPP

109

MPP

110

II
I

111

X Y
MRP OS
D1, D2 D3
D1 OR1
D2 OR2 D3

(D1 > D2 > D3)

D
R1
D

D1
R2

5
O

D3

D2
X

AMOUNT OF FACTOR DEMANDED/SUPPLIED

112

113

MRP MRP

OS OB
OC


DD1 X A OA AS
DD2 S
DD3 OB
DD4 OB OC

114

MRP/FACTOR PRICE

D
D
C

Q
D

D4
B

P
D3

A
O

D1 D2

AMOUNT OF FACTOR DEMANDED/SUPPLIED

D
D
D
S

D2

D1

S
D3

QUANTITY OF LABOUR DEMANDED/ SUPPLIED

OS DD1 DD2 DD3

(= OS)

115

N
H
F
E
S

A B

QUANTITY OF FACTOR DEMANDED SUPPLIED

(IN THOUSANDS)

SS OAOE OB OF
OC OH DD SS P
ON OL
ON OLPN

OAOE
ON OB OF ON OC
OH ON
SS NP

OLNP OLPS
SPN SPN
OLPN
OLPS

116

117

118

119

120

Topic-8

Antasky

121

(Natural Indowment)

(Technical Knowledge)

122

=
=

123


Y
A

B
0.5

C
2

AB AC

AB

AC

ABC

"Principles of Political Economy and
Taxation"

124

A B B
A A B

Y
1 A

B
O

C
2

AB AC

125

ABC

126

y x y x

D
t

knu
mRi

l
ouk
l aHkk

y oLrq
dh ek=kk
A

j s[kk
hek

uk o
aHkko
l
knu
mRi
B

y2

X1

X oLrqdh ek=kk

127

X2

DE tt

A x x1 y y1
tt y x
A y x
A tt
B y y1 y2 x x2 x1
B
A B
x

y
t
t
D

y oLrq
dh ek=kk
y

A
F
B

y2

X1

X oLrqdh ek=kk

X2

tt1 A D
y t1t1
D F D
A B F
Y X Y
F X

128

100

115

109
100 109
105

105
100 95
100

129

130

131

132

Y
S

dher

q1

oLrq

q2

D S q2
q1 q0 q0 q1

Y
D

P1
Pn

t Tariff

C
O

Q1

Q3

133

Q2

Qt


D S
Q0 Q1 Pw Q0 Q1

't' 't'
Pd
Q2 Q1 Pw
Pd A, B T
't' OQ2 't'
Q0 Q3
Q3 Q2 Pd
A, B C C
Pw Q3 Q2

'T' T
't' = t Q3 Q2)
(Tariff Barriers)

(A)
(I)

(II)
134

(III)

135

GATT

GATT

GATT

GATT
GATT
GATT

GATT

WTO

136

(EETA) (NAFTA),

137

EFTA, NAFTA

FTAs

EFTA
EFTA EU Europeon Economic Area (EEA)

EFTA EU

(NAFTA)
NAFTA

(i)

(ii)
Latin American Integration
Association (LAIN)
(iii) The Southern in Common Market

(iv)

EU

138

GATT, WTO, EFTA, NAFTA

139

Oligo Polein

(Main Features of Oligopoly)

140

(Causes for the existence of oligopoly)

(Causes for the existence of oligopoly)

(Firm-created Causes of Oligopoly)

141

 (Price and Output determination under Oligopoly)

(Cartel)

(Kinked Demand Curve Analysis)

(Sweezy's Model)

MC

D = AR

X
MR

DEDE DE

142

EE

(Nash Eqniligbrium)
(John Nash)

143

2/3

2/3

(Payoff Matrix)A
B
A
BAB
BAB
A

(Prisoner's Dilemma)
(Prisoner's Dilemma)

(Pareto Effiient solution)

144

(Nash Equilibrium)

(Cartel)
OPEC

(Brand Poolitiration)

(Set-up Costs)

145

 (Predatory Priceng)

(Contestable Market and potential Entry)

(Oligopoly and Market Mechanism)

(Profits Under Oligopoly)

(Long-run Competition)

146