CBSE Class 12 Economics Producers Behaviour And Supply To Economics Worksheet

Question. Explain the relation between average revenue and marginal revenue when a firm can sell an additional unit or a good by lowering the price.
Answer. 1. AR and MR both decreases.
2. MR decrease at the rate of twice than AR.
3. MR become zero and negative but AR can never be zero.

Question. Explain how does change in price of input affect the supply of a good.
Answer. A. Increase in price of input : increase in price of input is cause of a decrease in the supply of a good because the production cost of a good will increase due to increase in price of input. It will reduced the profit. So producer will decrease the supply of the good.
B. Decrease in price of Input : Decrease in price of input is a cause of increase in supply because when the price of input decrease the production cost of a good also also decreases. Decrease in cost increases the profit margin. It motivate to producer to increase the supply of the good.

Question. Explain how changes in prices of other products influence the supply of a given product.
Answer. The supply of a good is inversly influenced with the change in price of other product which can explain as fallows.
A. Rise in price of other product :– When there is rise in the price of other product the production of these product become more profitable due to unchanged cost in comparison of the production of given produce. As a result the producer will produce more quantity of other product so the supply of given good will decrease.
B. Fall in the price of other product :– When there is fall in the price of other product the production of these product become less profitable due to unchanged cost in comparison of the production of given product. As a result producer will produce less quantity of other product so the factors of production shifted for the production of given good. It cause an increase in supply of given good.

Question. Explain how technological advancement influence the supply of a given product.
Answer. Technological advancement brings a positive impact in the supply of a given product. It reduces per unit cost and increase the productivity of given factors of production. Due to these reasons production of given product becomes more profitable.

Question. What are the factors which give rise to increasing returns to variable factors?
Answer. 1. Fuller utilization of the fixed factors- Generally fixed factors are indivisible and underutilized. With greater application of variable factor these factors are better utilized its MPP tends to rise.
2. Increased efficiency of variable factor- Application of specialization and division of labour among the units of variable factors leads to greater efficiency and increase in MPP.