Answer all questions and use diagrams wherever possible to illustrate your answers Essay Example
1. The graph for city A which has lower price elasticity is as
The above graph shows that when the price is less elastic then the change in price is more as compared to the change in quantity especially when both the demand and supply curve changes in the long run.
In case of a more elastic prices determinant the graph looks as
The above graph shows that when the demand is more elastic the impact is more on price compares to price as a small change in price impacts quantity demanded to a larger degree thereby having an impact on the overall demand and supply
2. The impact excise duty has on cigarette is as
The above chart shows that having an excise tax increases the cost of cigarette which thereby reduces the demand for cigarette which has been highlighted above. It is clearly evident that having a tax increases the cost and thereby makes certain section of the society to say away from consumption of cigarette
3. The differences diminishing marginal returns and diseconomies of scale are as
Diminishing marginal returns finds out how production output decreases when one input is increased whereas others are kept constant whereas diseconomies of scale looks at finding out the manner in which companies no longer enjoy economies of scale and the cost increases when more and more units are produced.
Diminishing marginal returns occur in the short run whereas diseconomies of scale occur in the long run thereby resulting in the differences between the manner in which different returns are achieved.
4. Perfect completion and monopoly differs in the manner economic efficiency is achieved as perfect competition ensures that the business is able to make normal profits which thereby ensures the best use of resources whereas in case of monopoly the prices is determined by the organization offering services. This there results in difference i n the manner different assets are sued and creates doubts regarding the manner in which the different assets are used. This thereby has an impact on efficiency and results in differences as perfect competition results in better use of assets as compared to monopoly business.
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