VALIDITY OF PROFIT-MAXIMISING DOCTRINE

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VALIDITY OF. PROFIT-MAXIMISING DOCTRINE We have seen in thc analysis of a firm’s equilibrium that a producer is not interested in reducing either his average cost or total cost to the minimum or in maximising his revenue. What he is interested really is in the difference between his total cost including normal profit and total revenue which is his profit. […]

Incorporating Normal Profit into Average Cost

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Incorporating Normal Profit into Average Cost  A firm’s decision to stay or leave the industry will depend not only on whether it is covering average total cost as it is generally defined but also on whether it is earning at least normal profits. It is, therefore, useful to include normal profits in average cost. This inclusion of normal profits in average […]

CONDITIONS OF EQUILIBRIUM

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CONDITIONS OF EQUILIBRIUM We have said above that an industry is said to be in equilibrium when there is no tendency for its output to increase or decrease. Now the output of the industry can vary by the expansion or contraction of output by the individuals firms and the entry or exit of the firms, Thus, an industry would he […]

EQUILIBRIUM OF INDUSTRY

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EQUILIBRIUM OF INDUSTRY An industry is said to be in equilibrium when there is 110 tendency for it to increase or decrease its output. Now, it will have no tendency to expand or contract its output only when the demand for and supply of its product are in equilibrium. If, for instance, the demand for its product exceeds the supply, the output is hound […]

EQUILIBRIUM OF FIRM: BY CURVES OF MARGINAL REVENUE AND MARGINAL COST

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EQUILIBRIUM OF FIRM: BY CURVES OF MARGINAL REVENUE AND MARGINAL COST We know that a firm will be in equilibrium when it is earning maximum profits. We shall see presently that for a firm, to make maximum profits. two conditions arc essential: (i) Marginal Revenue = Marginal Cost. and (ii) MC curve cuts MR curve from below at the equilibrium point. It […]

Equilibrium of Firm : by Clines of Total Revenue and Total Cost

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Equilibrium of Firm : by Clines of Total Revenue and Total Cost A rational entrepreneur will expand output if he thinks he can increase his profits by doing so and he will likewise contract output if thereby he can avoid losses and thus increase profits. lie will be in equilibrium position at the level of output where his money profits are […]

EQUILIBRIUM OF THE FIRM AND INDUSTRY: GENERAL

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EQUILIBRIUM OF THE FIRM AND INDUSTRY: GENERAL finn is said to be in equilibrium when it has no incentive either to expand or to contract its output. A firm would not like 10 change its level of output only when ‘Is total profits arc the maximum. A rational entrepreneur will expand output if he: thinks he can increase his […]

Conclusion

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Conclusion In spite of these drawbacks, however, the general equilibrium represents a bold attempt to view the numerous interdependencies of an economic system. As the methods of computation improve, its practical utility may considerably increase. Summing lip In Economics, equilibrium analysis is of two kinds: Partial Equilibrium analysis and General Equilibrium analysis. In the partial equilibrium analysis, we focus our attention on […]

General Equilibrium and Macroeconomic Equilibrium

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General Equilibrium and Macroeconomic Equilibrium General equilibrium is different Firer the aggregate Of economic equilibrium. In micro economic aquiline models, the entire revenue product and the equilibrium price of a factor increase or decrease in accordance with its marginal productivity. Given the state of full employment or the available resources, the income shares of the various factors will depend upon their relative marginal […]

Essence of General Equilibrium Approach

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Essence of General Equilibrium Approach This inherent simultaneity of numerous mutual interdependencies and decisions necessitates the abandonment of partial equilibrium approach and the adoption of an approach general enough it’ll take account of the basic mechanics of the whole economy. An analysis that treats the various individual economic units and markets as inter-related and attempts to trace the nullification of an economic event to […]