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CBSE Class 12 Commerce Economics Producer Behavior And Supply Complete Notes

CBSE Class 12 Commerce Economics Producer Behavior And Supply Complete Notes

CBSE Class 12 Commerce Economics Producer Behavior And Supply : CBSE is a renowned educational Board, which comes under the Union Government of India. This eminent board was formed in 1952 and associated with the Board of High School and Intermediate Education, Rajputana. Ajmer, Gwalior, Merwara and Central India were included in the administrative territory of this board along with the other places including Bhopal, Ajmer and Vindhya Pradesh. From 1952 onwards, it has been providing a standard education and robust learning environment to all. The Central Board of Secondary Education or CBSE is a prestigious board of education and it provides affiliation to public and private schools. Apart from this, all Jawahar Navodaya Vidyalayas and kendriya vidyalayas are affiliated to this board.

CBSE Class 12 Commerce Economics Producer Behavior And Supply Complete Notes

CBSE Class 12 Commerce Economics Producer Behavior And Supply : Economic – of or relating to an economy, the system of production and management of material wealth; “economic growth”; “aspects of social, political, and economical life”. Economic – of or relating to the science of economics; “economic theory”. Economicconcerned with worldly necessities of life (especially money); “he wrote the book primarily for economic reasons”; “gave up the large house for economic reasons”; “in economic terms they are very privileged. Economicfinancially rewarding; “it was no longer economic to keep the factory open”; “have to keep prices high enough to make it economic to continue the service.economicusing the minimum of time or resources necessary for effectiveness; “an economic use of home heating oil”; “a modern economical heating system”; “an economical use of her time”

CBSE Class 12 Commerce Economics Producer Behavior And Supply Complete Notes

CBSE Class 12 Commerce Economics Producer Behavior And Supply : CBSE Basic Concepts and Assignment/ Sample Questions for Class XII  Ecomonics . Based on CBSE and CCE guidelines. The students should read these basic concepts to gain perfection which will help him to get more marks in CBSE examination.

Download here CBSE Class 12 Commerce Economics Producer Behavior And Supply Complete Notes In PDF Forma

 UNIT 3: PRODUCER BEHAVIOUR AND SUPPLY

Production: Combining inputs in order to get the output is production.

Production Function: It is the functional relationship between inputs and output in a given state of technology. Q= f(L,K) Q is the output, L: Labor, K: Capital Fixed Factor: The factor whose quantity remains fixed with the level of output.

CONCEPTS

Time period, can be classified as:

                 1. Very short period or market period

                 2. Short period / short run

                 3. Long period / long run

Market period : is that period where supply / output cannot be altered or changed.

Short period /run : is that period where supply / output can be altered / changed by changing only variable factors of production. In other words fixed factors of production remain fixed.

Long period : is that period where all factors of production are changed to bring about changes in output / supply. No factor is fixed.

Short answer questions and Long answer questions

1. What is meant by production?

Ans :- Transformation of Input into Output.

2. What will be MP when TP is maximum?

Ans :- MP will be zero.

3. Define market period, Short run & Long run.

Ans :- Refer time period.

4. Explain the law of variable proportions with the help of a schedule and a diagram . 6 Marks

5. What are the reasons for 6 Marks

             a) Increasing returns to a factor

             b) Diminishing returns to a factor

             c) Negative returns to a factor

6. Explain the difference between MPP & TPP.

HOTS

Giving reasons, state whether the following statements are true or false :

1. When there are diminishing returns to a factor, total product always decreases.

Ans :- False. When there is diminishing returns to a factor, TPP increases at a decreasing rate.

2. TPP increases only when MPP increases.

Ans :- False. TPP also increases when MPP decreases but remains positive.

3. Increase in TPP always indicates that there are increasing returns to a factor.

Ans :- False. TPP increases even when there are diminishing returns to a factor.

4. When there are diminishing returns to a factor marginal and total products always fall.

Ans: – False. Only MPP falls, not TPP. In case of diminishing returns to a factor, TPP increase at diminishing rate.

CBSE Class 12 Commerce Economics Producer Behavior And Supply Complete Notes

CBSE Class 12 Commerce Economics Producer Behavior And Supply : The consumer surplus (individual or aggregated) is the area under the (individual or aggregated) demand curve and above a horizontal line at the actual price (in the  aggregated case: the equilibrium price). If the demand curve is a straight line, the consumer surplus is the area of a triangle:

Calculation from supply and demand

CS = \frac{1}{2} Q_{mkt} \left( {P_{max} - P_{mkt}} \right)

Where Pmkt is the equilibrium price (where supply equals demand), Qmkt is the total quantity purchased at the equilibrium price and Pmax is the price at which the quantity purchased would fall to 0 (that is, where the demand curve intercepts the price axis). For more general demand and supply functions, these areas are not triangles but can still be found using integral calculus. Consumer surplus is thus the definite integral of the demand function with respect to price, minus the definite integral of the constant function D(P)=Qmkt (i.e. PmktQmkt), from the market price to the maximum reservation price (i.e. the price-intercept of the demand function):

CS = (\int_{P_{max}}^{P_{mkt}} D(P)\, dP)-P_{mkt}D(P_{mkt})

The graph shows, that if we see a rise in the equilibrium price and a fall in the equilibrium quantity, then consumer surplus falls.

Distribution of benefits when price falls

When supply of a good expands, the price falls (assuming the demand curve is downward sloping) and consumer surplus increases. This benefits two groups of people.
Consumers who were already willing to buy at the initial price benefit from a price reduction; also they may buy more and receive even more consumer surplus, and additional consumers who were unwilling to buy at the initial price but will buy at the new price and also receive some consumer surplus.

Consider an example of linear supply and demand curves. For an initial supply curve S0, consumer surplus is the triangle above the line formed by price P0 to the demand line (bounded on the left by the price axis and on the top by the demand line). If supply expands from S0 to S1, the consumers’ surplus expands to the triangle above P1 and below the demand line (still bounded by the price axis). The change in consumer’s surplus is difference in area between the two triangles, and that is the consumer welfare associated with expansion of supply.

Some people were willing to pay the higher price P0. When the price is reduced, their benefit is the area in the rectangle formed on the top by P0, on the bottom by P1, on the left by the price axis and on the right by line extending vertically upwards from Q0.

The second set of beneficiaries are consumers who buy more, and new consumers, those who will pay the new lower price (P1) but not the higher price (P0). Their additional consumption makes up the difference between Q1 and Q0. Their consumer surplus is the triangle bounded on the left by the line extending vertically upwards from Q0, on the right and top by the demand line, and on the bottom by the line extending horizontally to the right from P1.

Rule of one-half

The rule of one-half estimates the change in surplus for small changes in supply with a constant demand curve. Note that in this special case where the consumer demand curve is linear, consumer surplus is the area of a triangle. Following the figure above,

\Delta CS = \frac{1}{2} \left( {Q_1 + Q_0 } \right)\left( {P_0 - P_1 } \right)

       where:

  • CS = Consumers’ Surplus
  • Q0 and Q1 are the quantity demanded before and after a change in supply
  • P0 and P1 are the prices before and after a change in suppl

CBSE Class 12 Commerce Economics Producer Behavior And Supply Complete Notes

CBSE Class 12 Commerce Economics Producer Behavior And Supply :  On a standard supply and demand (S&D) diagram, consumer surplus (CS) is the triangular area above the price level and below the demand curve, since intramural  consumers are paying less for the item than the maximum that they would pay. In contrary, producer surplus (PS) is the triangular area below the price level and above the supply curve, since that is the minimum quantity a producer can produce. If the government intervenes by implementing, for example, a tax or a subsidy, then the graph of supply and demand becomes more complicated and will also include an area that represents government surplus.

Consumer’s surplus
       A. All goods are purchased at an equilibrium price.
B. Because consumers would have paid more for smaller quantities purchased, they are said to receive a surplus.
C. Videos
1. Calculating Consumer Surplus
2. Consume Surplus Practice Problems
D. Extra Credit
1. Barry Schwartz on the paradox of choice
2. Malcolm Gladwell on spaghetti sauce from TED
3. Discussion Question I always envy people that have something in life for which they have no diminishing utility. Do you know anyone? What was the product. If                         they are young, do you think their utility function will stay constant

CBSE Class 12 Commerce Economics Producer Behavior And Supply Complete Notes

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