Explain Shut Down Price
Explain the term Shut Down Price? Illustrate it.
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Shut Down Price (PSD): In purely competitive firm it is the price at which it loses exactly similar amount of money as if it shut down totally (that is, losing the value of fixed cost). Any price lesser than this is a price at which the firm is fine off shutting down than operating (that is, it will lose less shutting down than generating where marginal revenue equivalents marginal cost). Any price bigger than this and the firm is fine off operating than shutting down in short run, even when it is making a loss. The shut down price is at minimum point on the average variable cost (AVC) curve, or PSD = minimum AVC.
With the general equilibrium framework in place, the stage is now set for introducing fiscal and monetary changes and analysing their effects on the general equilibrium. We will first introduce a fiscal change in the form of increase in deficit-financed expenditure, a
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10 US dollars are exchanged for 500 Indian rupees. Calculate the exchange rate for Indian currency? Answer: $1 = 500/10 = Rs.50, that is, $1 = Rs. 50
What do you understand by the term Price (P) at Market in Economy?
Law of supply: It is the claim which, other things equivalent, the quantity supplied of a good increases whenever the price of the good increases.
Quantity of a good: The quantity of a good which buyers demand is found out by the price of the good, income, the prices of associated goods, expectations, tastes, and the number of buyers.
"In corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand."
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