Economics FAQs:

2-Define the sunk cost.

Sunk cost or expenditure that has been made and cannot be recovered is called sunk
cost. A sunk cost is usually visible, but after it has incurred, it should always be
ignored when making future economic decision. For example, the purchase of
specialized equipment designed for a plant. This specialized equipment has no
alternative use; its opportunity cost is zero. Thus it should not be included as part of
the firm’s costs.

3-Explain monopoly.
Monopoly is a market structure in which there is single firm that influences the market
price by how much it produces. Monopolist is known as price setter. A monopolist firm
has the power to influence the price for his good as the good it produces does not
have perfect substitute. Example, WAPDA
1-Define oligopoly.
Oligopoly is a market structure dominated by a small number of large firms, selling
either identical or differentiated products, or significant barriers to entry into the
industry. This is one of four basic market structures. For example, Cement, cars,
electrical appliance, oil.
4-Define price ceiling.
Price ceiling is a government mandated price that exists below the market’s
equilibrium price; price ceilings result in shortages. For example, government placed
price ceiling on medicines to facilitate people
1-Differentiate between inflation and unemployment.
Inflation is a rise in the general price level that results in a decline in the purchasing
power of money. In economics, a person who is able and willing to work yet is unable
to find a paying job is considered unemployed. The unemployment rate is the number
of unemployed workers divided by the total civilian labor force, which includes both
the unemployed and those with jobs (all those willing and able to work for pay). In
practice, measuring the number of unemployed workers actually seeking work is
notoriously difficult.
5-Is there any relation between inflation and unemployment?
The Phillips Curve indicates a relationship between unemployment and inflation
discovered by Professor A.W. Phillips. He found that there was a trade-off between
unemployment and inflation, so that any attempt by governments to reduce
unemployment was likely to lead to increased inflation. This relationship was seen by
Keynesians as a justification of their policies. However, in the 1970s the curve began
to break down as the economy suffered from unemployment and inflation rising
together (stagflation).
23-Is the natural rate of unemployment includes frictional, structural & seasonal
unemployment?
The natural rate of unemployment includes frictional, structural & seasonal
unemployment. But sometimes we exclude the seasonal unemployment.
-Can BOP of a country be positive?
BOP of a country can only be positive when the country's exports are greater than its
imports.
86-Why is it considered well to bring all BOP’s to zero?
If BOP of any country is zero, it reflects that the current account of that country has
enough balance to meet the requirements of that country and if the current account is
in surplus, the country might invest in other countries or lend money to other
countries.
76-Why capital account starts experiencing a deficit when domestic interest rate falls
below the world interest rate?
When domestic interest rates falls below the world interest rates. Investors would
deposit money in the international banks. As a result, local banks will receive less
income in the form of interest and less money will be invested in the economy which
means that economy will earn less and capital account will go in deficit.
74-What should be the decent/appropriate growth rate in any country?
A growth rate of between 2-3% is considered normal for mature developed countries;
for LICs, 5-7% is considered healthy and 7%+ is excellent
24-Is the terms of trade (TOT) defined as the ratio of the value of exports to the value
of imports? How does the TOT relate to the exchange rate?
The terms of trade (TOT) is defined as the ratio of price index of export goods (PIX) to
the price index of import goods (PIM) times 100, I.e., (PIX/PIM)*100. Since both price
indexes are based on the prices of domestic currency, so a rise in the exchange rate
of domestic currency, i.e., appreciation of domestic currency, will lower the import
prices and therefore improve the TOT. On the contrary, a fall in the exchange rate of
domestic currency, i.e., depreciation of domestic currency, will raise the import prices
and therefore worsen the TOT.
4-Why government can not print new currency to pay the debts?
When there is deficiency of internal resources then government borrow. Government
can borrow either from central bank (internal sources) or from IMF and World Bank
(external sources). But when government borrow from central bank by printing new
notes, the quantity of money in circulation increases, which leads to increase in
aggregate demand and then in inflation. So, Government has to borrow from external
sources, which is another way to solve the problem.
83-Why foreign dealings are done in dollars and not in rupees?
Foreign dealings are normally done in hard currency. The hard currency is any
national currency that is expected to retain its value and is readily acceptable for most
international transactions. The U.S. dollar is one of them. That is why foreign dealings
are made in dollars not in rupee, which is a type of soft currency.
12-Differentiate between nominal and real exchange rate.
Nominal exchange rate is the rate which actually prevails in the foreign exchange
market. The real exchange rate is the rate which is adjusted to relative prices (price of
foreign good divided by price of domestic good). Suppose, in foreign exchange
market, the nominal exchange rate is $/ Rs.2.00. That means we have to pay Rs.2.00
for $ 1.00 in foreign exchange market. When we talk about real exchange rate, then
we adjust the nominal exchange rate with relative price ratio of foreign to domestic
good. Now suppose that the relative price ratio of foreign to domestic good is $10/
Rs.15. Thus the real exchange rate is equal to Pf/Pd * Nominal exchange rate, i.e.
10$/15Rs * $/2Rs.
17-How do we evaluate the value of money?
Supply and demand determines the value of a currency. If demand is high, the value
rises, and vice versa. Factors that affect supply and demand include the following: •
Interest rates • Inflation • Balance of trade • Economic growth • Market speculators •
Government budget deficits/surpluses
49-What is main difference between nominal money supply and real money supply?
Real money supply is the supply of real money in the economy. Real money is
supplied considering the income level and actual return on investment prevailing in
the market. In contrast, nominal money supply is the controlled money supply which is
controlled by the SBP through its various instruments.
14-Explain the term economic efficiency?
Economic Efficiency means full utilization of all available resources in economy i.e. to
produce the required amount of goods and services. When economy is producing its
required amount of goods and services by utilizing all of its resources, then the
economy is considered to be an efficient economy.

7-Define law of demand.

Quantity demanded rises as price falls, other things constant. In other words, “Other
things remaining the same, when the price of a good rises then quantity demanded of
a good tend to contract and when the price of a good declines then the quantity
demanded of it tend to expand.”

8-Define law of supply.

Quantity supplied rises as price rises, other things constant. In other words, “Other
things being equal, when the price of a product rises, then sellers tend to supply a
large amount of it and when the prices of a product falls, then the sellers tend to
supply a smaller amount of it.

66-What is the difference between a change in demand and a change the quantity
demanded?
There is a distinction between demand and quantity demanded. Demand describes
the behavior of buyers at every price. At a particular price, there is a particular
quantity demanded. The term 'quantity demanded' makes sense only in relation to
particular price.
63-What is the difference between 'quantity supplied' and 'supply'?
There is a distinction between supply and quantity supplied. Supply describes the
behavior of sellers at every price. At a particular price, there is a particular quantity
supplied. The term 'quantity supplied' makes sense only in relation to a particular
price.

41-What is ceteris Paribus?

Ceteris paribus is a Latin phrase, literally translated as "other things the same," and
usually rendered in English as "all other things being equal." A prediction, or a
statement about causal or logical connections between two states of affairs, is
qualified by ceteris paribus in order to acknowledge, and to rule out, the possibility of
other factors which could override the relationship between the antecedent and the
consequent.

32-What are the factors which cause the shift in market supply curve?
Factors which cause the shifts in market supply curve are technology, natural shocks,
cost of production, expectation of producers and other social factors.
8-Why demand curve is important?
Demand curve is important because it indicates the level of demand in the market.
Suppliers supply their product and set price of their product, keeping in view demand
of that item in the market
30-What are the determinants of income elasticity of demand?
There are three determinants of income elasticity of demand. These are: Degree of
necessity of a good: In a developed economy, as income increases the demand for
luxuries increases a lot while the demand for necessity increases a little bit because
people cannot consume a lot of basic goods. So the items such as cars have very high
income elasticity of demand whereas items such as potato have low elasticity of
demand. Also inferior good have a negative income elasticity of demand. The rate at
which the desire for good is satisfied as consumption increases: The more quickly
people become satisfied, the less their demand will expand as income increases. Level
of income of consumer: In an economy, if the income of rich people increases the
demand for luxuries would increase because rich people now have more money. If on
the other hand, the income of poor people increase, the demand for necessity would
increase.

18-How elasticity is always referred to as a positive value even though it can be

negative?
In economics, elasticity is a measure of the incremental percentage change in one
variable with respect to an incremental percentage change in another variable.
Elasticity is almost always referred to as a positive value, meaning that people use the
absolute value in the case of a kind of elasticity that is normally negative. Sign with
elasticity indicate the direction or relation of variables like price elasticity of demand
have negative sign while income elasticity of demand have positive sign.
9-Why does a monopoly have no supply curve?
A supply curve is a curve that shows the quantity supplied at different prices, since a
monopoly sets the price and the quantity together; there is no combination of quantity
supplied and price under a monopoly. The best we can say is that there is a ‘supply
point’ that is set by the monopoly.
0-Differentiate between firm and industry.
A firm is a business unit formed for the purpose of carrying out some kind of trading
activity. The term “firm” is used in many ways, but the correct meaning is a business
carried on under a trading style by partners. Many people use the term “firm” to
embrace any business, i.e., Private Limited and Public Limited companies but this is
technically incorrect. An industry is generally any grouping of businesses that share a
common method of generating profits, such as the "movie industry", the "automobile
industry", or the "cattle industry". It is also used specifically to refer to an area of
economic production focused on manufacturing which involves large amounts of
upfront capital investment before any profit can be realized, also called "heavy
industry."
44-What is Game Theory?
Game Theory is a mathematical method of decision-making in which a competitive
situation is analyzed to determine the optimal course of action for an interested party,
often used in political, economic, and military planning. It is also called as theory of
games.
20-Is a public good a common property?
Public goods are goods that can be concurrently consumed by people. A good is a
public good or not depends on the nature of the good itself. Common property is a
property of which people have no exclusive rights to use, no exclusive right to derive
income from it and no right to transfer the right of using and deriving income from the
property. A property is a common property or not depends on how the property rights
of the property are defined by law and/or customs. A public good is NOT necessarily a
common property. For example, a concert is a public good but it is not a common
property. Moreover a common property is also NOT necessarily a public good too. For
example, the chairs inside the classroom are a common property but they are not
public goods.

33-What are the solutions to cure the "internal disequilibrium" and "external
disequilibrium"?
Internal disequilibrium means the economy has unemployment rate higher than the
natural rate and there is high inflation. In general, it can be solved by monetary and
fiscal policies. On the other hand, external disequilibrium means the economy has
imbalance balance of payments (BOP). If the exchange rate is a flexible rate, the
government has to do nothing because any imbalance will be solved by the
adjustment of the exchange rate. However, if the exchange rate is fixed, the BOP
imbalance can also be solved by monetary and fiscal policies.
37-What factors shift the Aggregate demand curve to right and what factors shift the
AD curve to left?
AD shifts to the right when any component of AD increases autonomously; e.g., if a)
Consumers become more willing to spend at every price level; b) There are
autonomous increases in investment due to better business prospects; c) The
government spends more, or reduces taxes; net exports rise at all prices (due to say
an increase in the quality of domestic goods relative to foreign goods). If above
mentioned facts are reversed, AD will shift to the left.

68-What is the difference between GDP and GNP?

Gross domestic product (GDP) is the value of the total final output produced inside a
country, during a given year. GDP, like all measures of national income, is a flow (as
opposed to stock) figure accruing over the period of one year. Gross national product
(GNP) is the value, at current market prices, of all final goods and services produced
during a year by the factors owned by the citizens of a country. Thus the income
earned by Pakistani citizens working in the US would be included in Pakistan’s GNP but
excluded from Pakistan’s GDP. Conversely, the income earned by a US citizen
(individual or corporate) in Pakistan would be included in Pakistan’s GDP but excluded
from Pakistan’s GNP. Generally, GNP = GDP + net factor income from abroad.

81-Why Equilibrium is necessary in an economy? Is it possible for an economy to be in

a state of equilibrium in real world?
Equilibrium is a state in which there are no shortages or surpluses in the economy and
there is absence of inflation or deflation. To avoid inflation or deflation, it is necessary
for an economy to have a state of equilibrium which is considered to be an ideal state
for an economy. It is possible for an economy to be in a state of equilibrium and an
economy wants to remain in the state of equilibrium for longer period of time if it has
a strong market, but it is not necessary that the economy is always in state of
equilibrium.
35-What does consumption function show?
Consumption function shows a functional relationship between consumption and
personal disposable income. There is positive relationship between personal
disposable income and consumption, i.e. when personal disposable income increases,
consumption also increases and vice versa.

71-What is the difference between price value and price level?

Price value is the value of commodity bought by the consumer at a certain price from
the market, whereas, price level is the current market price prevailing in the market

13-Differentiate between real and nominal variables.

In economics, the distinction between nominal and real numbers is often made.
Nominal variables -- such as nominal wages, interest rates and gross domestic product
(GDP) -- refer to amounts that are paid or earned in money terms. Real variables --
real wages, interest rates, and GDP -- are corrected for the effects of inflation. They
indicate the value of these numbers in terms of the purchasing power of wages,
interest, or total production.
85-Why investment increases much more than a change in income?
Whenever national income of any economy starts increasing, the investors foresee the
sound condition of the economy and start investing in that economy. That is why,
investment increases more that income does.
58-What is return on investment?
Return on investment is the profit earned by investing in some business or some
project, for instance investment in stock exchange. Profit earned from the trade of
shares of different companies is the return on investment made in the stock
exchange.
28-What are HICs and LICs?
HICs stand for higher income countries and LICs stand for lower income countries. The
World Bank’s main criterion for classifying economies is the gross national income
(GNI) per capita which is similar to but not the same as the gross domestic product
(GDP). Based on its GNI per capita, every economy is classified as low income, middle
income (subdivided into lower middle and upper middle), or high income. In low
income countries the GNI per capita is $745 or less; in lower middle income countries
it is $746 - $2,975; in upper middle income countries it is, $2,976 - $9,205; and in high
income countries it is, $9,206 or more.
6-Define injections and withdrawals.
“The inflows in circular flow of income are called injections”. Investment, government
spending and exports are included in injections “The outflows in circular flow of
income are called withdrawals”. Savings, imports and taxes are included in
withdrawals.
53-What is meant by minimum wage?
The minimum wage is the minimum rate a worker can legally be paid (usually per
hour) as opposed to wages that are determined by the forces of supply and demand in
a free market. In most cases, the minimum wage acts as a price floor. Each country
sets its own minimum wage laws and regulations, and many countries have no
minimum wage.
5-Give arguments for and against the concept of minimum wage.
Minimum wages may have the positive effect of: • Reducing wage slave low-paid
work. • Stimulating economic growth by increasing the purchasing power of workers. •
Stimulating economic growth by discouraging labor-intensive industries, thereby
encouraging more investment in capital and training. • Encouraging many of those
who would normally take low-wage jobs to stay in (or return to) school and thus to
accumulate human capital. On the other hand, minimum wages may have the
negative effects of: • Curbing economic growth by increasing the cost of labor. •
Increasing the price of goods and services, since employers may be able to pass on
wage costs in the form of higher prices. • Decreasing incentive for some low-skilled
workers to gain skills. • Where implemented locally, making labor more expensive
than in other areas, which may discourage inward investment and encourage local
businesses to relocate their operations elsewhere.

27-What are expansionary and contractionary effects?

Expansionary effect refers to the effect of raising the equilibrium level of national
income. For example, an increase in government spending will have expansionary
effect on the equilibrium level of national income. On the contrary, contractionary
effect refers to the effect of lowering the equilibrium level of national income. For
example, an increase in tax will have contractionary effect on the equilibrium level of
national income.
2-What is Deflation?

Deflation in economics refers to a decrease in the general price level, i.e. the nominal
cost of goods and services as well as wages decrease. Hence, it is an opposite of
inflation.
47-What is inflationary gap?
Inflationary gap is the measure of the ‘excess’ in aggregate expenditure to the full
employment aggregated expenditure, it appears when the equilibrium level of income
is ‘greater’ than the full employment level of income
6-What is hyper inflation? How it can be reduced?
Hyper inflation means that prices of the consumable goods are very high. Prices can
be reduced by supplying more goods in the market and it is only possible when new
production units are introduced in the market. This will decrease unemployment rate
as well.

70-What is the difference between Price inflation and Wage Inflation?

Price inflation is the rate of increase in the prices of goods and services while the
wage inflation is rate of increase in prices of factor of production.

19-How the inflation effect on the Import and Export of the country?
When general price level increases in an economy, local currency is devalued.
Economy has to spend more on imports and earns less in exports. In other words,
imports increase and exports decrease.

22-Is it true to say that inflation can only sustain with the increase in money supply?
Inflation can only be sustained if there is a persistent increase in money supply. If
there is only a once-and-for-all increase in money supply and so as the price level, it is
not inflation. For example, an increase in government expenditure.

51-What is meant by labor force?

In economics the labor force is the group of people who have a potential for being
employed. Normally, the labor force consists of everyone above a certain age (around
14 to 16) who is participating workers, that is people actively employed or seeking
employment. People not counted include students, retired people, stay-at-home
parents, people in prisons or similar institutions, as well as discouraged workers who
simply do not want work.

34-What are unemployment benefits?

Unemployment benefits are usually given by the state to the unemployed persons.
Unemployment benefits are usually given in higher income countries (HICs) where
people can live off rather well on unemployment benefit and therefore choose to not
work. The situation is not the same in lower income countries (LICs).
7-What is repayment of debt?
When money borrowed is paid back in full settlement. It is called repayment of debt.

38-What is "high-powered money"?

The “high-powered money” is the same as monetary base, which is defined, at the
minimum, as the sum of the currency in circulation (banknotes and coins) and the
balance of the banking system held with the central bank (the reserve balance or the
clearing balance)
45-What is GATT?
General Agreement on Tariffs and Trade (usually abbreviated GATT) functions as the
foundation of the WTO trading system, and remains in force, although the 1995
Agreement contains an updated version of it to replace the original 1947 one.
36-What does the IS-LM framework mean?
The IS-LM model helps us to understand the two opposing theories. The IS
(investment/saving) curve represents equilibrium in product markets. The LM
(liquidity/money) curve represents equilibrium in the money market. The point at
which the two curves intersect is the only combination of output and interest rates
(i.e., bond yields) where both the goods and financial markets are in balance.
31-What are the differences between the IS-LM model and the Keynesian model?
The 'simple' Keynesian model is a simplified model to illustrate Keynes’s idea about
the equilibrium income. On the other hand, the IS-LM model is a more general model
(involving more variables, e.g., P and r) to illustrate Keynes’s idea about the
equilibrium income.
43-What is Economics?
Economics is defined as the study of how people choose to use their scarce resources
in an attempt to satisfy their unlimited wants. In other words, we have unlimited
possibilities in life to do whatever we want, but we are limited by the resources we
have to do these things
72-What is the relationship between microeconomics and macroeconomics?
Either of microeconomics and macroeconomics separately is not adequate for the
explanation of the working of the economic system rather both are jointly needed for
the right solutions of economic problems. Microeconomics studies the working of the
small parts of the economy, which later on can help in understanding the whole of the
economic system. Macroeconomics by dividing the economic system into large parts
studies the inter-relationship among them. Therefore, microeconomics and
macroeconomics both are inter-related.
60-What is the benefit (main work) of economics in our life?
Economics plays a vital role in development of a country. A country's economy
indicates the stability of that country. If economy of the country is strong, it would be
ranked in the developed countries of the world. If, however, country's economy is not
that strong, it would be considered as one of the backward countries in the world.

75-Which type of economy is in Pakistan?

In Pakistan, there is mixed economy. Mostly, we have free market economy but in
some cases Government does interfere to keep prices at an acceptable level. For
example, prices of Wheat, flour, medicines etc.

67-What is the difference between economics and business?

Economics is the study of how we, the people, engage ourselves in production,
distribution and consumption of goods and services in a society whereas; business is
conducted to earn profit for our own use. Whatever we do to earn our livelihood is
called our business.
55-What is opportunity cost?
Opportunity cost is a term used in economics, to mean the cost of something in terms
of an opportunity foregone (and the benefits that could be received from that
opportunity), or the most valuable foregone alternative. For example, if a city decides
to build a hospital on vacant land that it owns, the opportunity cost is some other
thing that might have been done with the land and construction funds instead.

65-What is the difference between ‘stock’ and ‘flow’ concept?

A stock is a quantity of something held at a specific point of time. Examples are
population, savings, and unsold stock. A flow is an increase or a decrease in quantity
over a specific period of time. Examples are tax, monthly pocket money, and birth
rate.

61-What is the difference between 'Capital' and 'Capital value'?

Capital “The total amount of money or other resources owned or used to acquire
future income or benefits.” On the other hand, ‘Capital value’ is the present value of a
capital good. For example, a car is a capital and the price of the car is its capital value.
62-What is the difference between 'concept' and 'assumption'?
These two terms are very different. The term 'concept' refers to an idea or abstract
principle. For examples, force, space are concepts in Physics, God can be a concept in
religious beliefs, time is a concept in Metaphysics, demand & supply are concepts in
Economics, etc. However 'assumption' means a statement of something that has been
taken for granted or something that has been accepted without any real proof. For
example, "people are maximizers" is an assumption in Economics.
64-What is the difference between 'scarcity' and 'shortage'?
'Scarcity' and 'shortage' have different definitions. In reality, when most of the goods
and resources are scarce goods, we called this phenomenon 'scarcity'. On the other
hand, 'shortage' is defined as the situation where the quantity demanded is greater
than the quantity supplied because the market price is lower than the equilibrium
price.
39-What is affected variable and cause variable?
In a graph, one variable is dependant and the other is independent. The dependant
variable is called effect variable and independent variable is called cause variable
because it causes other variable to change its value.
16-How can we identify that something is elastic or inelastic?
When demand of any commodity does not change with the change in price of that
commodity, that item is said be inelastic. When demand of any commodity changes
with the change in price of that commodity, that item is said be elastic.
80-Why elasticity is important for economic analysis?
Elasticity is an important concept in understanding the incidence of indirect taxation,
marginal concepts as they relate to the theory of the firm, distribution of wealth and
different types of goods as they relate to the theory of consumer choice and the
Lagrange Multiplier. Elasticity is also crucially important in any discussion of welfare
distribution: in particular consumer surplus, producer surplus, or government surplus.
The concept of Elasticity was also an important component of the Singer-Prebisch
Thesis which is a central argument in Dependency Theory as it relates to development
economics.

77-Why concept of Elasticity is important in economics?

Elasticity is very important concept in economics because it affects the decision of
individuals as well as of the whole economy. . It can help us in many ways. For
example, for a firm the concept of elasticity is important because it gives information
that either the change in price is profitable or not. It also gives information about the
good which is more profitable to produce i.e. more inelastic the demand for the
product, more profitable to produce that good. For a government, it is useful in the
sense that it gives information about the commodity which is to be taxed and which is
not to be taxed. It also gives important implication for the balance of payment
problem.
69-What is the difference between indifference curve and isoquants?
An indifference curve shows different combinations which a consumer can buy with a
given level of income. Indifference curve shows behavior of a consumer in
consumption. An isoquant shows different combinations of factors of production which
a firm can employ. Isoquant shows behavior of a firm in production.
26-What are economies of scale and diseconomies of scale?
In economics, returns to scale and economies of scale are terms that are related and
sometimes incorrectly used interchangeably. They describe what happens as the scale
of production increases. Economies of scale and diseconomies of scale refer to an
economic property of production that affects cost, if quantity of all input factors by
some amount is increased. If costs increase proportionately, there are no economies
of scale; if costs increase by a greater amount, there are diseconomies of scale; if
costs increase by a lesser amount; there are positive economies of scale. When
combined, economies of scale and diseconomies of scale lead to ideal firm size theory,
which states that per-unit costs decrease until they reach a certain minimum, then
increase as the firm size increases further
9-Differentiate between Actual and Potential output.
Actual output is that level which economy actually produces. In contrast, potential
output is the aggregate capacity output of a nation; the maximum quantity of goods
and services that can be produced with available resources and a given state of
technology.

73-What is uncertainty cost? Explain its effects on firms and producers?

The cost attached to uncertainty is called uncertainty cost. When uncertainty
increases in an economy, firms become uncertain about prices of the goods which
mean inability to accurately forecast firm revenues and expenditures, which means
lower investment in the industry of the economy.
48-What is main difference between capital intensive goods and primary products?
Primary product means the main product in which the firm is dealing. Capital intensive
good means the production of good in which more capital is involved than labor.
87-Why is the LRAC curve U-shaped and what is it relationship with SRAC curves?
First of all, the LRAC is not necessarily U-shaped. For example, if we assume that the
production has constant returns to scale, the LRAC will be a horizontal straight line.
However the SRAC is still U-shaped because we assume diminishing marginal returns
in short run. However the LRAC should ‘envelope’ to all the SRAC curves, that means,
all the U-shaped SRAC curves will be on and above the horizontal LRAC. It is because
the LRAC is always the ‘lowest’ average production cost at all levels of production.
82-Why firm charges different prices to different consumer?
Every firm wants to maximize its profit. When goods are sold to different customers,
every customer negotiate price of the good independently. So, different prices are
settled with different customers. So, different prices are charged from different
customers to maximize firm's profit.

21-Is it possible for a firm to be both Price taker and price maker?
A firm can either be a price taker or a price maker. It cannot be price maker and price
taker at the same time because when a firm will set its own price in the market for its
good. At that time, it will be a price maker not a price taker.
40-What is black marketing?
Black Marketing means hoarding of certain commodity to sell it at higher prices. But it
is an illegal activity in the economy and creates artificial shortage of that commodity
and lead to temporary condition of higher inflation in the economy.

54-What is meant by non Price Competition? In which market structure does it exist?
None price competition is an effort put by the supplier to earn extra profit without
increasing the price of the commodity. For instance, suppliers announce some prize
schemes or announce some extra benefits with the commodity. It can be present in
every competition except Monopoly.
52-What is meant by market failure?
Market failure describes the circumstances in which distortions prevent the invisible
hand from allocating resources efficiently

50-What is market clearing level?

Market clearing level is the price level prevailing in the market at which consumer is
willing to buy a particular commodity from the market
6-What is public good?
A public good is a good that, even if it is consumed by one person, is still available for
consumption by others. For example, clean air is a public good, so is national defense
or public safety.

59-What is the Adam smith view of "invisible Hand"?

Invisible hand is an unknown power which is working for the interest of whole
economy. In any economy, everybody cares for his/her personal benefit in the market
but market as a whole also runs very smoothly which means that there is some
unknown power behind economic market which is running the whole economy. One
example of this invisible hand is Government itself.
9-What are subsidies?
Almost in all market systems, government plays its role to stabilize the price of certain
commodities, which are of public interest like medicines and edibles etc. For this,
government give some incentives to producers to produce certain commodities, that
is, to keep the supply and price of those commodities stable at certain level .These
incentives, given to the producers, are called subsidies.