Basic Competitive Models

Basic competitive models gives an answer of the control problems of an economy i.e., who makes the decision of what to produce, how to produce and for whom to produce. We know that, economics has been evolved and developed in the framework of a free market economy in which the … read more

Cobb – Douglas Production Function

This Cobb-Douglas production function is based on the empirical study of the American manufacturing industry made by Paul H. Douglas and C.W. Cobb. It is a linear homogeneous production function that considers only two inputs, labor and capital, for the total output of the manufacturing industry. The Cobb-Douglas production function … read more

Questions on Linear Programming Problem (LPP) Graphical Method

Question 1: Maximize Subject to, Ans: (60,20) and 1100 Question 2: Maximize Subject to, Ans: (4,2) and 10 Question 3: Minimize Subject to, Ans: (1,5) and 13 Question 4: Minimize Subject to, Ans: (6,12) and 240 Question 5: Minimize Subject to, Ans: (4,0) and (3,0.25) and 24 Question 6: Maximize … read more

Schumpeter’s Innovation Theory of Trade Cycle

The innovation theory of trade cycles is associated with the name of Joseph Schumpeter. Schumpeter accepts Juglar’s statement that “the cause of depression is prosperity,” and gives his own view about the originating cause of the cycle. “Innovations in the industrial and commercial organization are virtually mainly the outcome of … read more

Inter-temporal Price Discrimination

Two other closely related forms of price discrimination are important and widely practiced. The first of these is inter-temporal price discrimination: separating consumers with different demand functions into different groups by charging different prices at different points in time. The second is peak-load pricing: charging higher prices during peak periods … read more

Peak Load Pricing

Peak-load pricing also involves charging different prices at different points in time. Rather than capturing consumer surplus, however, the objective is to increase economic efficiency by charging consumers prices that are close to marginal cost. For some goods and services, demand peaks at particular times—for roads and tunnels during commuter … read more