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Concept: The law of demand has an inverse relationship with its price, i.e., as the price rises, the quantity demanded decreases and vice versa. However, it is very important to understand the extent of the relationship or the degree of responsiveness of demand to change in its determinants. I.e., how sensitive is demand to its […]
Law of Variable Proportions or Law of Diminishing Returns: Before understanding The Law of Variable proportions or Law Of Diminishing Returns we need to understand a few concepts: Concept 1 : Total product: when we talk about total product, what exactly do we mean by total product? It is the total output resulting from the […]
“Cost is a fundamental notion in economics.” It refers to the sum of money paid to get products and services. To put it another way, cost is a financial assessment of the resources, materials, hazards, time, and utilities consumed to acquire goods and services. Cost principles and interrelationships: Optimal input utilization and production. A farmer’s […]
Meaning The mathematical relationship between the cost of a product and various determinants of costs is referred to as a cost function. The dependent variable in a cost function is unit cost or total cost, while the independent variables are the price of a factor, the size of the output or capacity utilization, or any […]
MEANING : It refers to inputs. Let us understand what we mean by inputs. An input is a good or service which a firm buys for its use in its production process. Production process consists of various processes such as Changing in the form of natural resources ( eg. changing the form of log of […]
Production Optimization: Generally, a profit-maximizing firm wants to determine which combination of factors of production (or inputs) would minimize its cost of production for a given output. This can be known by combining the firm’s production and cost functions, namely isoquants and iso-cost lines, respectively. Let us understand what we mean by isoquants. Isoquants: An […]
DEMAND FORECASTING Forecasting of demand is an art and science of predicting the probable demand for a product or service at some future date on the basis of certain past behaviour patterns of some related events and prevailing trends in the present. BASICS Forecast means to predict. So what is demand forecasting? It is forecasting […]
Demand forecasting can be at the national or international level. Thus, the scope of forecasting tasks will depend upon the area of operation of the firm in the present as well as what is proposed in future. Demand forecasting can also be confined to a given product or service supplied by a small firm in […]
MEANING OF PRODUCTION; What do you understand by production in common parlance? Well, the simple answer would be the term production is an activity of making something material. The following are the few examples of production: Growing of wheat, rice or any other agricultural crop by farmers.Manufacturing of cement, radio sets, wool machinery or any […]
Table Of Contents:Exceptions to the law of demandConspicuous goodsGiffen goodsConspicuous necessitiesFuture expectations about pricesIncomplete information and irrational behaviourDemand for necessariesSpeculative goods Expansion and Contraction of demand Increase and Decrease in demand Effect of non-price determinants of demand Movements along the demand curve VS. shift of demand curve Exceptions to the law of demand: we know that as per law […]
CONTENTSRationale of the law of demand: Price effect of a fall in price: Utility maximizing behaviour of consumer: Arrival of new customers: Different uses: Rationale of the law of demand: We know that the demand curve slopes downwards. There is an inverse relationship between quantity demanded and its price. i.e, as price decreases, quantity demanded […]
BASIC PROBLEMS OF AN ECONOMYWhat To Produce?How To Produce? For Whom To Produce?What Provisions (if any) are to be made for Economic Growth?ECONOMIC SYSTEM CLASSIFICATION OF ECONOMIESCAPITALIST ECONOMY, SOCIALIST ECONOMY & MIXED ECONOMY BASIC PROBLEMS OF AN ECONOMY Just like resources are scarce for humans, all countries face the problem of scarcity of resources without any exception. […]
Table of Contents:CAPITALIST ECONOMYCHARACTERISTICS OF CAPITAL ECONOMYRIGHT TO PRIVATE PROPERTYFREEDOM OF ENTERPRISEFREEDOM OF ECONOMIC CHOICEPROFIT MOTIVECONSUMER SOVEREIGNTYCOMPETITIONABSENCE OF GOVERNMENT INTERFERENCEHOW DO CAPITALIST ECONOMIES SOLVE THEIR ECONOMIC PROBLEMS?DECIDING WHAT TO PRODUCE?DECIDING HOW TO PRODUCE?DECIDING FOR WHOM TO PRODUCE?DECIDING ABOUT SAVINGS, CONSUMPTION AND INVESTMENTSINTERPRETATIONMERITS OF CAPITALIST ECONOMYDEMERITS OF CAPITALIST ECONOMYCONCLUSIVE STATEMENT An economic system in which all […]
Table of Contents SOCIALIST ECONOMY CHARACTERISTICS OF SOCIALIST ECONOMY COLLECTIVE OWNERSHIP ECONOMIC PLANNING ABSENCE OF CONSUMER CHOICE RELATIVELY EQUAL INCOME DISTRIBUTION MINIMUM ROLE OF PRICE MECHANISM OR MARKET FORCES ABSENCE OF COMPETITION MERITS OF SOCIALIST ECONOMY DEMERITS OF SOCIALIST ECONOMY CONCLUSIVE STATEMENT Characteristics of Socialist Economy: Key Characteristics of a Socialist Economy Collective Ownership Economic […]