MICROECONOMICS CH : 5 THEORY OF DEMAND — Economics STD 11 Commerce — Question

Find out mean deviation of the following data (use mean):

Item:	5	10	15	20	25	30	35	40
Frequency:	8	16	18	22	14	9	6	7

Is distrust of statistics justified? Explain your viewpoint with the suitable example.

Calculate the co-efficient of correlation for the following data by the actual mean method.

X	65	66	67	68	69	70	71
Y	67	68	66	69	72	72	69

Consider the examples given below:

1. As price falls, demand for product 'A' increases.
2. Effect of adequate irrigation facilities, fertilisers and pesticides on per hectare productivity of wheat.

On the basis of above examples explain the main difference between simple correlation and multiple correlation.

The following table shows the estimated sectoral real growth rates (percentage change over the previous year) in GDP at factor cost.

Year	Agriculture and allied sectors	Industry	Services
1994-95	5.0	9.2	7.0
1995-96	-0.9	11.8	10.3
1996-97	9.6	6.0	7.1
1997-98	-1.9	5.9	9.0
1998-99	7.2	4.0	8.3
1999-2000	0.8	6.9	8.2

Represent the data as multiple time series graphs.

Each firm in a perfectly competitive market is a price taker; the equilibrium price and industry output are determined by demand and supply. Price-taking behaviour is central to the model of perfect competition. Perfectly competitive firms in general-have no reason to charge a price lower than the market price. Because buyers have complete information and because we assume each firm's product is identical to that of its rivals, firms are unable to charge a price higher than the market price. For perfectly competitive firms, the price is very much like the weather: they may complain about it, but in perfect competition there is nothing any of them can do about it. While a firm in a perfectly competitive market has no influence over its price, it does determine the output it will produce. In selecting the quantity of that output, one important consideration is the revenue the firm will gain by producing it.

1. Why can a firm not earn abnormal profits under perfect competition in the long run?
2. Under perfect competition the seller is price taker. How?

Explain the concept of fixed cost with the help of a table and diagram.

Draw one diagram showing average total cost curve, average variable cost curve and marginal cost curve.

What are the characteristics of a perfectly competitive market?