Isocost curve is that curve represents the combination of inputs that will cost the producer the same amout of money. We get the slope of the isocost line. The isocost line shows the various combinations of labor and capital a firm can buy with a given price. The slope of isocost line = PL/Pk. In the given equation, the price of labour is indicated by PL and the price of capital is given by PK. The isocost line may change if the amount of money spent to buy factors changes but the slope remains the same.
If the capital increases with the decrease in labour, the isocost will remain same. Hence, if the capital invested in the production of rice are increasing and the labors are decreasing then also the cost of the production will remain same. …show more content…
India which consumes 95% of the rice it produces, rice prices are a main part of national welfare to both producers and consumers. Owing to India’s greater use of export tariffs vs. export restrictions and its monopoly power in the production of rice limited the full effect of price decrease. Economic welfare has been lowered by trade. Producers were forced to sell in the domestic market which benefitted by the consumer.
Expected trade policies will improve national welfare as India’s monopoly power of …show more content…
Consumer and producer welfare is compared by Partial equilibrium. Several assumptions are made such as a two country model, which is perfectly substitutable homogeneous good, perfectly competitive markets, and free trade between the two countries. A large country model is used since India’s share of rice exports is significantly large in the world price and world market increases were attributed to her actions. India will be designated as the domestic economy; the rest of the world (ROW) will be designated as the foreign economy; and rice, the good. In case of export restrictions , non-basmati rice is considered and if we take export tariffs, basmati rice will the good that needs to be considered.
Two definitions are necessary prior to the evaluation of trade policy: consumer welfare and producer welfare. Consumer welfare is measured by consumer surplus and is defined as the satisfaction consumers achieve by paying less for the market price of a good than they would have been willing to pay. Figure 1 denotes how consumer surplus is
If the capital increases with the decrease in labour, the isocost will remain same. Hence, if the capital invested in the production of rice are increasing and the labors are decreasing then also the cost of the production will remain same. …show more content…
India which consumes 95% of the rice it produces, rice prices are a main part of national welfare to both producers and consumers. Owing to India’s greater use of export tariffs vs. export restrictions and its monopoly power in the production of rice limited the full effect of price decrease. Economic welfare has been lowered by trade. Producers were forced to sell in the domestic market which benefitted by the consumer.
Expected trade policies will improve national welfare as India’s monopoly power of …show more content…
Consumer and producer welfare is compared by Partial equilibrium. Several assumptions are made such as a two country model, which is perfectly substitutable homogeneous good, perfectly competitive markets, and free trade between the two countries. A large country model is used since India’s share of rice exports is significantly large in the world price and world market increases were attributed to her actions. India will be designated as the domestic economy; the rest of the world (ROW) will be designated as the foreign economy; and rice, the good. In case of export restrictions , non-basmati rice is considered and if we take export tariffs, basmati rice will the good that needs to be considered.
Two definitions are necessary prior to the evaluation of trade policy: consumer welfare and producer welfare. Consumer welfare is measured by consumer surplus and is defined as the satisfaction consumers achieve by paying less for the market price of a good than they would have been willing to pay. Figure 1 denotes how consumer surplus is