As output rises, the Average fixed cost (AFC) goes on declining

The AFC curve is therefore an onward sloping curve. (ii) As output approaches Zero, average fixed cost approaches infinity, but AFC curve never touches the Y-axis. On the other hand, as output reaches very high levels, average fixed cost approaches zero, but it never reduces itself to zero, it always remains positive. Hence the AFC […]

The Substitution Effect

Given a constant money income, a change in the relative prices of two goods may force a consumer to rearrange his purchases. He may re-arrange his purchased of the tow goods in such a way that his satisfaction remains the same. This is known as the substitution effect. This substitution effect refers to the change […]

Factors Affecting the Demand Curve

Factors Affecting the Demand Curve Examples Average Income When average income increases, demand increases Population Increase in the population increases the market size and hence demand Price of Related Goods Substitutes: When relative price of potassium fertilizers increases, demand for Nitrogenous fertilizers increases Complements: When the price of petrol increases, demand for Light Commercial vehicles […]