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ELASTICITY OF DEMAND

ELASTICITY OF DEMAND Elasticity is a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants. Economists usually refer to the coefficient of elasticity as the price elasticity of demand, a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in the quantity demanded divided by the percentage change in price. Other coefficients of elasticity may relate to 'income elasticity of demand', 'cross-elasticity of demand', What Is Price Elasticity of Demand? Price elasticity of demand is an economic measure of the change in the quantity demanded or purchased of a product in relation to its price change. Expressed mathematically, it is: Price Elasticity of Demand = % Change in Quantity Demanded / % Change in  price. There are different types of price elasticity of demand i.e. 1) perfectly elastic demand, 2) perfectly inelastic demand, 3) relatively elastic d

What is Production ?

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PRODUCTION Production is the process of making or manufacturing goods and products from raw materials or components. In other words, production takes inputs and uses them to create an output which is fit for consumption. In other words, production is the creation of utilities. Production may be defined as the transformation of raw materials to finished goods and the distribution and provision of goods and services in other to satisfy human wants.   . Concept of Total, Marginal and Average Productivity   • TOTAL PRODUCT : It is the entire quantity of a commodity produced with a given quantity of productive resources. i.e. TP = AP × Q • AVERAGE PRODUCT : This is the total product divided by the amount of variable input used to produce the total output. i.e. AP = TP /Q • MARGINAL PRODUCT : This is the additional unit of the variable input. .e MP = Change in TP/ Change in Q The law of diminishing returns   states that as more of the variable factor is added to other factors wh

Production possibility curve

Production possibility curve   Production possibility curve is also called production frontier, transformation curve, production possibility boundary. It is described as the graph or curve that shows the combination of goods that can be produced in any economy given the available resources and the prevailing state of technology. It is further explained as the choice of commodity that could be produced and the opportunity cost of reallocation between these resourses        A  production–possibility frontier  ( PPF)  or  production possibility curve  ( PPC ) is a curve which shows various combinations of the amounts of two goods which can be produced within the given resources and technological graphical representation showing all the possible options of output for two products that can be produced using all factors of production, where the given resources are fully and efficiently utilized per unit time. A PPF illustrates several economic concepts, such as allocate,efficiency , econom

Measure of Central tendency

Economic theory is made up of definitions and assumptions about human behaviors. The definition and assumptions are usually represented in words, mathematically or graphically. This topic is devoted to some of the tools of economic analysis. These are tables, charts, graphs, means, mean deviation, standard deviations, geometric mean and variance etc      The basic tools of economic analysis are categorized as follows: Measures of central tendency Measures of dispersion Graphical presentation of data.  MEASURES FOR CENTRAL TENDENCY Measures of central tendency is also known as measure of location .This describes the center or average of a set of data. In fact it provides the average value around which a set of data revolves search averages are arithmetic mean the media the mode geometric mean and of course and harmonic mean .Measure of Central tendency can also be described as the statistical measures that pick the middle or Central value ,single quantity or member in the majority. When

OPPORTUNITY COST OR REAL COST

OPPORTUNITY COST Opportunity cost is the sacrifice made in making an economic decision, expressed in terms of the next best available alternative foregone. It is a central concept in economics, and if often regarded as the ‘true’ cost of an economic decision.Its otherwise known as alternative forgone,real cost and true cost. Opportunity cost is defined as the alternative that has been forgone for instance if Mr Ola has to choose between buying a shirt and a pair of shoe the real or opportunity cost of a shirt is the pair of shoe he has to do with that. you can say the opportunity cost of any item is referred to as an alternative forgone in order to buy that Item  while money cost is the actual amount of money spent on buying such item BENEFITS OF OPPORTUNITY COST It helps individuals to allocate resourses It helps individuals to prioritise needs It helps firms in decision making on what,how and for whom to produce It's guides business firms in policy formulation and implementa

TUTORIAL QUESTIONS

SELECTED QUESTIONS QUESTION 1 (a) Describe the main types of public Expenditure (b) Give the reasons that may account for an increased government expenditure in your countr SOLUTION (a) Public expenditure can be classified into two headings namely, Recurrent  expenditure and Capital expenditure.  Recurrent Expenditure: These are the expenses on running costs which are repeated every year. Expenses on payment of wages and salaries, maintenance of infrastructure, payments of rents and interest are examples of recurrent expenditure. Capital Expenditure: are expenses on projects of permanent nature. These expenses do not recur every year. Examples of capital expenditure include building of schools, hospitals, roads, dams, electrification projects, procuring new machineries, aircrafts and construction of airports. (b) Government expenditure in Nigeria had been increasing year in year out for the following reasons. Population growth: the need to provide more social amenities such as sch

SUGGESTED QUESTIONS

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QUESTION 1 The supply situation for rice in a country over a period is as shown in the table below.Use the information in the table to answer the following questions that follow. (i) calculate the coefficient of price elasticity for rice between December 2004 and January 2007. (ii) Is the supply of rice elastic? (iii)State any three reasons which may cause the supply of rice SOLUTION (I) (ii)   (iii)     QUESTION 2 (a) Explain the concept of diminishing marginal utility. (b) How is utility maximized. SOLUTION (a) Diminishing marginal utility is concerned with consumption. The concept states that the satisfaction derived from consuming each additional unit of a commodity will diminish as the total consumption increases as more is consumed, of the marginal utility decreases. For Instance, the first cup of cold pure water will give a high level of satisfaction to a thirsty consumer during a hot day. However the second cup will not give him as much satisfaction as the fi