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The relationship between TU and MU is such that:                      • When TU is increasing, MU is decreasing.                      • When TU is at the maximum, MU is zero.                      • When TU is decreasing, MU is in negative.  (Disutility) Consider the graph below for details: Prepared by NSHIMIRYAYO ANGE

In allocation of resources in the production of goods and services,an invester(entrepreneurs) face a number of fundamental economic questions nemed below:       1. What to produce?  Here the Entrepreneur needs to decide on the nature of the goods to produce. he/ she may decide to produce capital goods or consumer goods.       2. How to produce?   The producer has to decide on the methods and techniques to be used in the production process. The producer may decide to use capital intensive techniques of production or labour intensive techniques of production. The technique of production minimises costs while at the same time maximises the level of output.       3. When to produce?  The producer is required to decide whether to produce now or to produce in future. The producer is normally guided by the demand for the products in the market. The best time for production is when the demand for the goods or services is...

IS/ LM MODEL: GENERRAL EQUILIBRIUM OF PRODUCT AND MONEY MARKET This chapter integrates money, interest and income into a general equilibrium model of product and money markets in the Hicks-Hansen diagrammatic framework.  The IS = Investment/Saving which represents the product market equilibrium LM = Money demand (L)/ Money supply (M) which represents the money market equilibrium INTRODUCTION In order to analyze the general equilibrium of product and money markets, it is instructive to study the derivation of the IS/LM functions and their slopes for the understanding of the effectiveness of monetary and fiscal policies. The IS-LM curve model emphasizes the interaction between the goods and money markets.  Continue The product market is in equilibrium when desired saving and investment are equal. Saving is a direct function of the level of income : S = f(Y)…….(1) Investment is a decreasing function of the interest rate : I = f(r)……..(2) From (1)and (2) = I=S The produ...