Demand
Supply
Production
Distribution
Consumption
Consumption function
Cost
Price
Competition
Monopoly
Profit
Optimisation
Marginal-Average
Elasticity
Macro and Micro analysis
1. DEMAND
Most
DEMAND
of Commodity/ services
Willingness to buy
Ability to pay
demand
Actual demand
LAW OF DEMAND
2. SUPPLY
Production
and supply
Supply refers to the amount of quantity of a
good/ service willing and able to offer for sale
by producers at a given price, during a given
time and at a given place.
Supply function relates quantity supplied with
own price, related goods prices, Technology,
input prices, weather/ Road conditions,
transportation, movement restrictions, so on)
Supply Curve shows a positive association
between Qs and P, ceteris paribus.
Based
LAW OF SUPPLY
MARKET CLEARANCE
Both demand and supply interact to determine the
market equilibrium
Depending on which kind of market and time
period, each force has its role on market.
While demand and supply are influenced by a
number of factors
In very short run, supply is given, medium run
there is some scope for increase and in long run, it
is fully flexible.
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3. CONSUMPTION
An unavoidable human activity which satisfies
individuals by fulfilling wants-both economic and
non-economic
Goods and services possess utility or want
satisfying quality in them
Since goods and services cost us, we COMPARE the
benefit (utility) and costs (price).
An algebraic relationship between national income
and consumption spending that tells us what, for
each possible level of national income, the level of
consumption spending will be.
Laws of consumption
Diminishing
utility
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CONSUMPTION FUNCTION
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4. PRODUCTION
Conversion of inputs into output (Ag/ Ind/ Mfg)
Creation of utility (services)
Controversy to exclude/include services in GDP
Traditional factors of production (L, L, C, M)
How can production be increased?
Increasing
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PRODUCTION..CONTD
Applicability of these laws
Assumptions:
State
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5. DISTRIBUTION
Distribution refers to sharing of the national product
among the groups of individuals as factors of
production.
Factors of production/ factor payments
Land, labour, capital, organization (features)
Wages, rent, interest, and profit
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6. COST
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7. PRICE
Money value of all economic goods/ services. What
are non-economic goods?
Factors that determine price
Cost
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8. COMPETITION
In economics, competition is judged on the basis of
number of sellers in the market for a product or
service
A continuum from Monopoly to perfect competition
Worldwide, the trend is to ensure greater
competition
What are merits and limitations of competition?
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9. MONOPOLY
In Greek, Mono means single, Poly means seller.
In contrast to PC, Monopoly is an extremely
imperfect competition
Monopoly is a market form in which a single
producer/ firm supplies a good/ service which has
no close substitute.
The monopolist is a price-maker
He can virtually decide to fix any price/ supply but
not both of them simultaneously
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FEATURES OF MONOPOLY
1.
2.
3.
4.
5.
6.
7.
Single seller
No close substitutes
No variation between firm and industry
Entry is fully restricted
Product is unique
Huge profits is common phenomenon in LR.
But, Normal Profits/ occasionally even losses are
not ruled out in short run
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10. PROFIT
Difference
cost
Profit is reward for organizing other factors
of production and also for taking business
risks
Profits arise in a dynamic world due to the
presence of uncertainty.
Do profits conflict with societal interest?
No. Primary responsibility of a business firm
is to ensure its own economic performance
which is to utilize resources optimally.
If a firm does not do so, no only it collapses,
in the process, it ruins society also by adding
to unemployment/ low demand for material 22
inputs/ fall in investments, etc.
11. OPTIMIZATION
Fundamental
rule of economics is to
conserve resources which are all scarce.
Optimum utilization is a relative term. It
depends on the existing know-how at a point
in time.
For instance, when the 2-stroke engines
alone were there, a mileage of about 40-45
kmpl was a better utilization.
Faster trains/ data transmission rates/
search engines on Internet, etc. are
optimizing out time and cost.
Division of labour and specialization lead to 23
optimum use of resources
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13. ELASTICITY
Degree of responsiveness of some dependent
variable like demand/ supply/ output given some
change in one of the variable input.
It could be positive/ negative
Example
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CONCLUSION
Good
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