Physiocrats

A group of economists who believed that the wealth of nations was derived solely from the value of "land agriculture" or "land development.

Mercantilists
People who follow the economic doctrine that government control of foreign trade is of highest importance for ensuring the military security of the country.

Capitalists
People who follow the economic system characterized by private or corporate ownership of capital assets and goods.

Socialists
Folk who enforced the economic system characterized by social ownership of the means of production and co-operative management of the economy.

Monetarists
Monetarism is a school of economic thought that emphasizes the role of governments in controlling the amount of money in circulation. It is the view that variation in the money supply has major influences on national output in the short run and the price level over longer periods.

Keynesians
Keynesianism is the view that in the short run, especially during recessions, economic output is strongly influenced by aggregate demand (total spending in the

economy).

 Adam Smith -

was a Scottish moral philosopher and a pioneer of political economy; one of the key figures of the Scottish Enlightenment, Adam Smith is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). Smith is cited as the "father of modern economics" and is still among the most influential thinkers in the field of economics today.

Alfred Marshall

- is known as one of the founders of economics. Marshalls interest in utilitarianism, specifically ethics, reflects the influence of his early social philosophy to his later activities and writings. His book, Principles of Economics (1890), was the dominant economic textbook in England for many years. It brings the ideas of supply and demand, marginal utility, and costs of production into a coherent wholesome.

 Robert Malthus -

was a British cleric and scholar, influential in the fields of political economy and demography. Malthus became widely known for his theories about change in population. His An Essay on the Principle of Population observed that sooner or later population will be checked by famine and disease. Food production grows in arithmetic progression whereas the population grows in geometric progression. was a British political economist. His most important contribution was the theory of comparative advantage, a fundamental argument in favor of free trade among countries and of specialization among individuals. According to his Theory of Rent, rent is the portion of the produce of earth to the landlord, for its original and indestructible powers of the soil. Ricardo argued that there is mutual benefit from trade (or exchange) even if one party (e.g. resource-rich country) is more productive in every possible area than its trading counterpart (e.g. resource-poor country), as long as each concentrates on the activities , where it has a relative productivity advantage.

David Ricardo -

 Jean Baptiste Say(J.B Say) - was a French economist and businessman. He

had classically liberal views and argued in favor of competition, free trade, and lifting restraints on business. He is best known due to Say's Law, which is named after him and at times credited to him, but while he discussed and popularized it, he did not originate it.

John Stuart Mill (J.S Mill)

was an English philosopher, political economist and civil servant. He has been called "the most influential English-speaking philosopher of the nineteenth century. Mill's conception of liberty justified the freedom of the individual in opposition to unlimited state control. He was a proponent of utilitarianism, an ethical theory developed by Jeremy Bentham.

Economics

Micro

Macro

Monetary

Public

Income (of Government)

Individuals, Firms, Markets, Families.

Income, Consumption, Savings, Export, Import, Government Expenditure, Investments, Taxes, Inflation.

Money, Rate of interest, RBI, SEBI, Stock Exchange, Exchange Rates, Depreciation.

Expenditure (of Government) All the Taxes (by Government)

LAW OF DEMAND
The law of demand says that ceteris paribus when the

price of a product is high, quantity demanded is low, and vice versa. In other words, other factors remaining the same, the demand for a product is inversely related to the price.

DETERMINANTS OF DEMAND
TASTES AND PREFERENCE S OF THE CUSTOMER CHANGES IN POLICY EXISTING WEALTH OF THE CUSTOMER

PRICE OF THE COMPLEMEN TARY PRODUCT

DEMAND

EXPECTATIO N REGARDING FUTURE PRICE CHANGES

PRICE OF THE SUBSTITUTE PRODUCT INCOME OF THE CUSTOMER

SPECIAL INFLUENCES

NATURE OF THE DEMAND CURVE - changes in demand curve

12

10
8 6 4 2 0 q1 q2

DEMAND FORECASTING TECHNIQUE: Normal equation:

Equation of straight line y = a+bx Multiply both sides with , we get y = n(a) + (b) x Multiply both sides with x, we get xy = n(a)x + (b) x2 This is also called as regression method.

11/29/2013

ELASTICITY OF DEMAND
Elasticity is the proportional (or percent) change in

one variable due to the proportionate change in another variable. The formula for elasticity is: E = percentage change in x percentage change in y

TYPES OF ELASTICITY OF DEMAND

Price elasticity of demand:
Cross elasticity of demand: Income elasticity of demand:

Advertising or Promotional Elasticity of Demand:

DEMAND FORECASTING METHODS

Expert opinion
Survey Market experiment

Time series Analysis

Barometric Analysis

LAW OF SUPPLY
The law of supply states that, other factors remaining

constant, higher the price, greater is the quantity supplied and lower the price, lower is the quantity supplied. The supply function is represented as: SX=f(PX), other things remaining constant Whereas, SX=Amount of product X supplied; and PX=Price of the product

The supply schedule and supply curve of chocolates as an example

Situation
A

Price
50

Quantity Supplied
22

60

50

40

B
C

40
30

15
30 Series1

9
20

D
E

20
10

4
10

0
0 0 5 10 15 20 25

DETERMINANTS OF SUPPLY
CHANGES IN GOVERNMENT POLICIES

CLIMATIC CHANGES

SUPPLY

COST OF PRODUCTION

AVAILABILITY OF OTHER PRODUCTS

ELASTICITY OF SUPPLY
Elasticity of supply refers to the percentage change in

quantity supplied of a product due to one percent change in its price. This can be denoted in an equation form E= % change in the quantity supplied of a product % change in its price = Q/Q = Q x P P/P P Q Where, E=elasticity, P= original price, Q= original quantity. P= change in price, Q= change in quantity.

TYPES OF ELASTICITY
When the elasticity of supply is Equal to infinity More than one but less than infinity Equal to one Less than one but more than zero Equal to zero Known as Perfectly elastic supply Relatively elastic supply Unitary elastic supply Relatively Inelastic supply Perfectly Inelastic supply

ISOQUANTS
The Isoquant Curve is a

graph showing possible inputs after certain levels of output.

The Isoquant Curve helps

firms adjust their input against their output. This is a method used to measure the influence of inputs on production levels and output possibilities.

INDIFFERENCE CURVE ANALYSIS

It is also called as

Ordinal Utility Theory Utility is not Measurable but it is measurable relatively Utility can be ordered in pairs. People reveal their preference. Budget curve(E) defines maximum limit

LAW DIMINISHING MARGINAL UTILTIY

The law of diminishing

marginal utility states that if a consumer goes on consuming more units of a particular product at a given point of time, his total utility increases but only at a diminishing rate. In other words, the desire of that product goes on decreasing as he consumes more and more units of that product.

LAW OF DIMINISHING MARGINAL PRODUCT

When one of the factors

of production is held fixed in supply, successive additions of the other factors will lead to an increase in returns up to a point, but beyond this point returns will diminish.

Production function
The production function

explains relationship between the maximum quantity of output that can be processed from given amounts of various inputs for a given technology, which can be expressed in the form of a mathematical model, schedule (table) or graph. Q=f(K,L) where, capital(K) and Labor(L) are categorized under the production function Q.

Types of Production Function

There are two types of production functions. i) Cobb Douglas production function:It is widely used to represent the technological relationship between the amounts of two or more inputs, particularly physical capital and labor, and the amount of output that can be produced by those inputs. It is given as P(L, K) = L k -1 Where, P = total production in a year L = labour input K = capital input and are the output elasticity of labour and capital, respectively. ,-change of o/p with respect to i/p

Constant elasticity of substitution (CES) is a property of some production functions and utility functions; more precisely, it refers to a particular type of aggregator function which combines two or more types of consumption, or two or more types of productive inputs into an aggregate quantity. This aggregator function exhibits constant elasticity of substitution. ii) CES production function:The CES production function is a type of production function that displays constant elasticity of substitution. In other words, the production technology has a constant percentage change in factor (e.g. labour and capital) proportions due to a percentage change in marginal rate of technical substitution.

Q F (ak (1 a) L )
r

r 1/ r

Where, Q= output. F = Factor productivity a= Share parameter K,L = Primary production factors (Capital and Labor) r= (s-1)/s s= 1/(1-r) = Elasticity of substitution.

Factors Of Production
According to the traditional classification, there are four factors of production. They are Land Labor Capital Organization/Entrepreneurship

Q=f(L,L,K,O) Where, Q= production function

Land
Land as a factor of production refers to all those natural resources or

gifts which are provided free to man. It includes several things such as Land surface, air, water, minerals, forests, rivers etc.

Labor
Labor is the human input into the production process.
Alfred Marshall defines labor as the use or exertion of body and mind,

partly or wholly, with a view to secure an income apart from the pleasure derived from the work. The concept of Division of Labor was introduced by Adam Smith in his book An Enquiry into the Nature and Causes of Wealth of Nations.

Capital
Capital is the man made physical goods used to produce other goods

and services a.k.a., money. According to Marshall, Capital consists of those kinds of wealth other than free gifts of nature, which yield income. Forms of Capital
Physical or Material Resources. Money Capital or Monetary Resources. Human Capital or Human Resources.

Organization or Entrepreneurship
An entrepreneur is a person who combines the different factors of

production(land, labor and capital), in the right proportion and initiates the production and also bears the risk involved in it. They are otherwise called as Organizers. Functions of Entrepreneur
Identifying the Profitable Investible Opportunities.
Deciding the size of unit of production. Deciding the location of the production Unit. Identifying the optimum combination of factors of production. Making Innovations.

Deciding the reward payment.

Taking risks and facing Uncertainties.

PERFECTLY COMPETTITIVE MARKET

The following are the characteristics of a perfectly competitive market: Large number of buyers and sellers. Homogenous product. Free entry and exit of firms. Perfect mobility. Absence of transportation cost . FIG:- Demand curve of a firm in a perfectly competitive market.

MONOPOLY
Monopoly is a type of

market structure in which there is only one seller of the product in the market, there are no close substitutes for the product and there are barriers to entry. Thus, monopoly is the exact opposite of the market situation prevailing in perfect competition.

OLIGOPOLY
Oligopoly is a form of

imperfect competition in which a few firms produce either a homogenous product or products which are close but not perfect substitutes for each other. The number of firms may vary from two to ten firms. A market in which there are only two players is called DUOPOLY.

FACTORS IN OLIGOPOLY
Kinked Demand curve:-

It explains the interdependence of the firms in a n oligopoly and why firms stick to one price. Cartel formation:Cartels are formed when competing oligopolists enter into some kind of an agreement in order to maximize joint profits.
joint-profit maximization sharing of the market. Price Leadership:One firm sets the price and the others follow, because it is advantageous to them or they prefer to avoid uncertainty.

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