Home / APSC / ECONOMICS Part 1 | General Awareness for every Competitive Exams | at a glance

ECONOMICS Part 1 | General Awareness for every Competitive Exams | at a glance

ECONOMICS

INTRODUCTION

1. MICRO ECONOMICS: It is a study of behaviour of individual units of an economy such as individual consumer, producer etc.
2. ECONOMY: An economy is a system by which people get their living.
3. PRODUCTION POSSIBILITY CURVE (PPC): PP curve shows all the possible combination of two goods that can be produced with the help of available resources and technology.
4. MARGINAL OPPORTUNITY COST: MOC of a particular good along PPC is the amount of other good which is sacrificed for production of additional unit of another good.
5. MARGINAL RATE OF TRANSFORMATION: MRT is the ratio of units of one goods sacrificed to produce one more unit of other good.


DEMAND

Demand:- Quantity of the commodity that a consumer is able and willing to purchase in a given period and at a given price.
Demand Schedule:- It is a tabular representation which shows the relationship between price of the commodity and quantity purchased.
Demand Curve:- It is a graphical representation of demand schedule.
Individual Demand:- Demand by an individual consumer.


Factors Affecting Individual Demand For a Commodity/Determinants of Demand:-

1. Price of the commodity itself
2. Income of the consumer
3. Price of related goods
4. Taste and Preference
5. Expectations of future price change

Demand Function:-
Dx = f( Px, Y, Pr, T)


 

Law of Demand:-

Other things remains constant, demand of a good falls with rise in price and vice versa .

Changes in Demand:-
They are of two types:
1) Change in Quantity Demanded (Movement along the same demand curve)
2) Change in Demand (Shifts in demand)

Change in Quantity Demanded: –
Demand changes due to change in price of the commodity alone, other factors remain constant; are of two types;
A) Expansion of demand : More demand at a lower price
B) Contraction of demand : Less demand at a higher price

Change in Quantity Demanded: –

Due to price change → Movement will takes place → Extension and contraction

Change in Demand
Due to other than price change → Shifting will takes place → Increase and decrease

Change in demand:-
Demand changes due to change in factors other than price of the commodity, are of two types:
A) Increase in demand:- more demand due to change in other factors, price remaining constant.
B) Decrease in demand:- less demand due to change in other factors, price remaining constant.

Causes of Increase in Demand:-
1. Increase in Income.
2. Increase/ favorable change in taste and preference.
3. Rise in price of substitute good.
4. Fall in price of complementary good.
Note: Increase in income causes increase in demand for normal good

Causes of Decrease in Demand:
1. Decrease in Income.
2. Unfavorable/Decrease in taste and preference
3. Decrease in price of substitute good.
4. Rise in price of complementary good.
Note: Decrease in income causes Decrease in demand for normal good


 

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