Producer Behaviour and Supply Test - 5

The supply curve illustrates the relationship between the price of a good and the quantity of the good that producers are willing to supply.

The change in total product is due to the changebrought about by an additional unit produced, which is the marginalproduct.  Since fixed cost do not change,it is only the change in variable factors which is reflected in the marginalproduct. and the change in total product depends upon the change in marginalproduct.

In the short run variable factors like labour, raw materials can be changed easily. It is difficult to change fixed factors like land, machinery, equipments, etc in the short period as procuring/selling land or machinery or capital will take time and it is difficult to change them in the short period.

Total fixed costs remain constant in the short run because fixed inputs, like rent and machinery, do not change with the level of output. Even if production increases or decreases, fixed costs remain the same.

In the short run, only the variable factors canbe changed. Fixed factors cannot be changed in the short run.

The marginal rate of technical substitution (MRTS) is the rate at which one input can be substituted for another while maintaining the same level of output. It is constant when two goods are perfect substitutes.

The marginal product curve is 'inverse U-shaped'.

A cost curve in economics is a graph that shows the production costs as a function of the overall quantity produced. Long-run average cost curves (LRAC) and short-run average total cost curves (SRAC) are both generally expressed as V-shaped curves. However, not all of the curves' shapes may be attributed to the same causes.

It is the locus of all the points showingvarious quantities of a commodity that a producer is willing to sell at variouslevels of price.

According to Keynesian theory, the equilibrium level of income in an economy is determined when aggregate demand as represented by the C + I curve is equal to aggregate output (aggregate supply or AS). The Aggregate Demand and Aggregate Supply Equilibrium provides information on price levels, real GDP, and changes in unemployment, inflation, and growth as a result of new economic policy.

According to the law of demand​​​​when the price of a commodity increase, the quantity demanded decreases. when the price of a commodity decreases, it’s the quantity demanded increases. keeping other factors remains the same. The consumer’s demand for good must be inversely related to the price of the good.