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2) What is Scarcity?
3) Explain decision-making?
Ans: Decision making is the process of making selection based on some criteria of
one alternative from two or more alternatives. Decision making is a process of
selection and the aim is to select the best alternative.
5) What is Marginalism?
Ans: The opportunity cost of a decision is the sacrifice of the next best alternative
course of action available.
E.g. A Businessman invests his own capital in a business, its opportunity cost can be
measured in terms of the interest he could have earned by lending that money to
somebody.
Ans: Marginal utility refers to that kind of utility which measures the additional
benefit derived from the consumption of an additional unit of the commodity
purchased. The law of demand is based on the law of diminishing utility; it implies
that by increasing the stock of a commodity its marginal utility is diminished.
Ans: The Concept of discounting is based on the simple principle that a rupee today is
worth more than a rupee tomorrow. Hence whenever the present value of a business
is to be known, the future values will have to be discounted.
Discounting principle can be stated as “If a decision affects the costs and revenues at
future dates, it is necessary to discount those costs and revenues to present values
before a valid comparison of alternatives is possible.
Ans: According to Oscar Lange “Econometrics is the science which deals with the
determination of statistical methods of concrete quantitative laws in economic life”
Econometrics is a discipline combining economic theory, statistical method and
mathematical precision.
Ans: The difference between the maximum that consumers would be willing to pay
for a good and what they actually do pay for each unit of the good is called consumer
surplus.
Consumer Surplus = Total utility from the commodity minus Total utility of money
lost in paying its price.
03 Production Function
1) Define Duopoly?
Ans: A true duopoly is a specific type of oligopoly where only two producers exist in one
market. In reality, this definition is generally used where only two firms have dominant
control over a market.
It is a situation in which two companies own all or nearly all of the market for a given
type of product or service.