Microeconomics

04/17/2023 Hemant meena 1

SUBMITTED TO:-

Miss.Tanu Verma

PRESENTED BY:-

Hemant Meena Branch (ECE)2nd year

MICROECONOMICS

BRANCH:-Electronics & communication Engineering

Title


CONTENT1.

2. What is consumer surplus3. What is Willing to pay(WTP)4. How to calculate Consumer surplus 5. The return of scale(a). Increasing return of scale(b). decreasing return of scale(c). constant return of scale6. The law of return

What is microeconomics


What is microeconomics Microeconomics is branch of

economics that studies the behaviour of businesses and how decisions are made based on the allocation of limited resources.


What is consumer surpuls

it is the difference between the total amount that consumer willing and able to pay for goods and service and the total amount that we actually do pay . i.e. the market price


What is Willing to pay(WTP) The maximum amount that we able

to pay. it is also known as “reservation price”.


How to calculate consumer surplusSLICE 1 2 3 4 5 6

WTP 6 Rs 5 Rs 4 Rs 3 Rs 2 Rs 1 Rs

P* = 3 , Q = 4 CS = (6-3)+(5-3)+(4-3)+(3-3) CS = 6 Rs

P* = 2 , Q = 5CS = (6-2)+(5-2)+(4-2)+(3-2)+(2-2)CS = 10 Rs


Why are economists interested in the consumer surplus?

Economists are interested in consumer surplus because it measure economic welfare, plays a large part in changing market prices, plays a role in the price elasticity of demand and allows for price discrimination.

http://www.investopedia.com/terms/c/consumer_surplus.asp


The return of scale It explains the rate of increase in output

relative to increase in input.While economiecs of scale show the effect of an increased output level on unit costs, returns to scale focus only on the relation between input and output quantities.


• The causes of increasing return of scale

1.Technical and managerial indivisibilities

2. Higher degree of specialization3. Dimensional relations


• When firm increases the inputs proportionately there are three possibilites

1. total output may increase more than proportionately2. total output may increase proportionately3. total output may increase less than proportionately

Accordingly there are three kind of return of scale

1. Increasing return of scale2. decreasing return of scale 3. constant return of scale


• Increasing Returns of Scale

Increasing returns of scale occurs when a firm increases its inputs, and a more-than-proportionate increase in production results.


Decreasing return of scale

Decreasing returns of scale is closely associated with diseconomics of scale.Decreasing returns of scale happens when the firm's output rises proportionately less than its inputs rise.


Constant return of scale

When the change in input is proportional to the change in output.it exhibits constant return of scale


Law of return

If the factor of production is increased, there comes a point where it will become less productive and therefore there will eventually be a decreasing.



MP

QL

graph of Diminishing Returns


Historical example In the war of America and

Japan , America is use firebombing and reduce numbers of soldiers . This uses law of diminish of return


THANKS FOR YOUR

ATTENTION

Economy & Finance

Microeconomics