Economists of the forum are requested to post the answers of the following queries in a simple and comprehensive way so the concept may be cleared.

1. What is opportunity Cost? how it can be calculated?
2. What is elasticity/price elasticity of demand/supply?
3. Balance of Payments, Balance of Trade .


regards

opportunity cost

price elasticity of demand

price elasticity of supply

balance of payments

balance of trade

__________________
Mahmood Khattak
Pakistan Customs Service
36th CTP

the above post has given very comprehensive answer to your query i m just giving u general idea a basic concept about each:
1. What is opportunity Cost?
Opportunity cost is basically a benefit or best alternative foregone, for example, if a person rent's his building to some firm, he could have used this building for his own use.. so the later is the opportunity cost of renting the building which is his capital. we mostly do not calculate opportunity cost in economics it is just a concept to understand.
2. What is elasticity/price elasticity of demand/supply?
elasticity is basically the responsivness of one variable to another variable for example when price of a commodity increases it demand decreases this is called price elasticity of demand, and it would be negative for price increase same goes for price elasticity of supply when price of any commodity increases it's supply also increases and vice versa so it is positive for price increase
3. Balance of Payments, Balance of Trade .
The balance of payments measure the cash flow between the host country and other countries. It summarizes all financial transactions for a given time period for the country.
While the balance of trade is the difference between the monetary value of exports and imports in a given economy.

Thanks for response.

now here comes an

WHAT IS INDIFFERENCIVE CURVE?

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Jo Sauraj se bhi hiddat cheen lai gain
Kuch asay akheer logoo se wasta he

Indifference Curve is a locus of various combinations of quantities of two goods, which make a consumer indifferent to choose between them. Thus along an indifference curve consumer's utility remains the same.

Properties:

Indifference curves must be convex to the origin.
Indifference curves can not intersect each other.
The slope of an indifference curve is known as marginal rate of substitution (MRS). MRS is diminishing as one goes along the indifference curve towards flatter part.

Hope this would help.

Regards

and at higher indifference curve utility of consumer will be higher or higher the indifference curve higher the satisfaction....

@Hina_a
@new student

Thanks for the reply ..........

Question No. 3 : Demand / Supply Curve?

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Jo Sauraj se bhi hiddat cheen lai gain
Kuch asay akheer logoo se wasta he

The Demand Curve:
I have already explained the Demand Curve here:
http://www.cssforum.com.pk/css-optio...economics.html

The Supply Curve:
The relationship between the quantity sellers want to sell during some time period (quantity supplied) and price is what economists call the supply curve. Though usually the relationship is positive, so that when price increases so does quantity supplied, there are exceptions.

Shifts of the Supply Curve:

Movement along the supply curve: Movement along the supply curve is due to a change in either the quantity supplied, or the price.

Shift of the supply curve: A shift of the supply curve comes from outside forces, such as a change in the consumers want/needs, economic changes (recession), or technological changes.

This link is also helpful...
http://www.netmba.com/econ/micro/supply/curve/

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I don't give anyone a reason to HATE ME. They create their own drama out of PURE JEALOUSY...!!!

Question : What is Production possibility curve / frontier? please explain with examples

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Jo Sauraj se bhi hiddat cheen lai gain
Kuch asay akheer logoo se wasta he

Production Possibility Frontier (PPF)
Under the field of macroeconomics, the production possibility frontier (PPF) represents the point at which an economy is most efficiently producing its goods and services and, therefore, allocating its resources in the best way possible. If the economy is not producing the quantities indicated by the PPF, resources are being managed inefficiently and the production of society will dwindle. The production possibility frontier shows there are limits to production, so an economy, to achieve efficiency, must decide what combination of goods and services can be produced.

Let's turn to the chart below. Imagine an economy that can produce only wine and cotton. According to the PPF, points A, B and C - all appearing on the curve - represent the most efficient use of resources by the economy. Point X represents an inefficient use of resources, while point Y represents the goals that the economy cannot attain with its present levels of resources.

As we can see, in order for this economy to produce more wine, it must give up some of the resources it uses to produce cotton (point A). If the economy starts producing more cotton (represented by points B and C), it would have to divert resources from making wine and, consequently, it will produce less wine than it is producing at point A. As the chart shows, by moving production from point A to B, the economy must decrease wine production by a small amount in comparison to the increase in cotton output. However, if the economy moves from point B to C, wine output will be significantly reduced while the increase in cotton will be quite small. Keep in mind that A, B, and C all represent the most efficient allocation of resources for the economy; the nation must decide how to achieve the PPF and which combination to use. If more wine is in demand, the cost of increasing its output is proportional to the cost of decreasing cotton production.

Point X means that the country's resources are not being used efficiently or, more specifically, that the country is not producing enough cotton or wine given the potential of its resources. Point Y, as we mentioned above, represents an output level that is currently unreachable by this economy. However, if there was a change in technology while the level of land, labor and capital remained the same, the time required to pick cotton and grapes would be reduced. Output would increase, and the PPF would be pushed outwards. A new curve, on which Y would appear, would represent the new efficient allocation of resources.

When the PPF shifts outwards, we know there is growth in an economy. Alternatively, when the PPF shifts inwards it indicates that the economy is shrinking as a result of a decline in its most efficient allocation of resources and optimal production capability. A shrinking economy could be a result of a decrease in supplies or a deficiency in technology.

An economy can be producing on the PPF curve only in theory. In reality, economies constantly struggle to reach an optimal production capacity. And because scarcity forces an economy to forgo one choice for another, the slope of the PPF will always be negative; if production of product A increases then production of product B will have to decrease accordingly.

__________________
I don't give anyone a reason to HATE ME. They create their own drama out of PURE JEALOUSY...!!!