a) The law of demand states that demand of a good increases when its price falls and its consumption decreases when the price of the good rise and this is generally caused by two effect both normal and inferioir goods. Identify and explain these two effects? Explain the difference between these two effects that affects the two goods normal and inferior good?
b) Identify two different ways whereby a firm determines its profit maximizing level of output operating in perfectly competitive market and explain why would a firm choose to continue operations and to stay in business when it does not earned economic profits but normal profits in a competitive equilibrium?