Differentiate between changes in demand and changes in quantity demanded.
In the realm of introductory microeconomics, distinguishing between changes in demand and changes in quantity demanded is crucial to understanding market dynamics. Demand refers to the overall consumer desire for a particular good or service at various price levels, considering other factors like income, preferences, and substitutes. On the other hand, quantity _____ ________ _____ _________ _______ ____ _____ _____ _________ ________ _______ _______.
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Consider Figure 3, where DD and D’D’ represent the two different demand curves for a commodity in two different markets. Compare the two demand curves in terms of the price elasticity of demand.
Consider Figure 1 below where MC, ATC, AVC, D, and AR represent the marginal cost, average total cost, average variable cost, demand, and average revenue curve respectively under a perfect competition. Based on the figure, answer the following questions:
(i) What is the profit maximising level of output for this firm in the short-run? At this quantity, what is the marginal revenue?
(ii) How much is the total cost for this firm in the short-run equilibrium?
(iii) In the short run, is the firm making economic profit or suffering loss? How much is that profit or loss? Should the firm shut down?
(iv) How much is fixed cost faced by this firm at equilibrium?
(v) What is the break-even price for this firm? What is the shut down price for this firm?
(vi) If fixed cost increases further, what impact will this have on this firm’s profit maximising level of output in the short run?
