10 mark questions
20. (a) Explain consumer's equilibrium with the help of indifference curves.
Or
(b) Explain the Law of Increasing return.
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Explanation:
A. Consumer equilibrium refers to a situation, in which a consumer derives maximum satisfaction, with no intention to change it and subject to given prices and his given income. The point of maximum satisfaction is achieved by studying indifference map and budget line together.
B. The law of Increasing Returns is also known as the Law of Diminishing Costs. According to this law when more and more units of variable factors are employed while other factors are kept constant, there will be an increase of production at a higher rate.
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