“THANK YOU FOR BEING HERE

TODAY.I’M PANKAJ SONI AND I’M HERE

TODAY TO TALK TO YOU ABOUT
ECONOMICS &DEMAND”
 OUTLINE
 DEFINITION OF ECONOMICS

 DIFFERENCE BETWEEN MICRO & MACRO ECONOMICS

 CENTRAL PROBLEM OF AN ECONOMY

 CONCEPT OF UTILITY

 LAW OF DIMINISHING MARGINAL UTILITY

 CONSUMER EQUILIBRIUM

 MEANING OF DEMAND

 LAW OF DEMAND

 EXCEPTION TO LAW OF DEMAND

 MEANING OF MARKET DEMAND

 ASSUMPTION OF DEMAND

 DETERMINANTS OF DEMAND

 Causes of Increase in Demand

 Causes of Decrease in Demand
 Relationship between Income and Demand
 Definition of Economics

 Economics is a social science concerned with

the production , distribution and consumption
of goods and services.
Difference Between Micro & Macro Economics
Basis Micro Macro
It deal with the It Deals with the whole
Meaning individual unit of an economy
economy

Tools Demand & Supply Whole Demand

&Supply

Objective It aim to Determine

• Price of commodity
It aim to Determine
• Income
• Factor of production • Employment Level of
Economy

Other name It Also Known as Price theory It Also Known as Employment

theory
 Central Problem Of An Economy
• Allocation of Resources
It refers the problem of assigning
the Save resource in such a manner
so that maximum wants of the
society can be fulfilled.
  What toProduce
 What goods & services to be produces by given resources
Consumer Goods
Bread &Butter
Producer Goods
Machinery & Equipment
War time goods
Tank & Guns
 How to Produce
 It refers what kind of technology should be used for the production of goods &Services

Labor {Man
CapitalPower}
{Machinery}
There are two types technology
 Labor intensive {More Labor >Less Capital] in INDIA
 Capital Intensive
{More Capital > Less
Labor} in U.S.A
 For whom to
Produce
Refers with consumers of Income
This problem is refers to selection of the category of people who are ultimately consume the Goods &
service

More goods for Rich & Less for poor

Less Goods For Rich & more for poor

 Luxury Goods for Rich

 Necessary Goods for Poor

 Concept Of Utility
 Utility:- Wants Satisfying Power Of a goods
 
TU:- Total Utility:-It is the Total Utility Derived by
Consumption of All the
Unit of a commodity.
TU = ∑MU
MU:- It is the Utility Derived by one more Additional unit of a
Commodity.
MU=∆
 Relatio
 When TU M n
 When T U
Maximum MU = Zero
U MU become
 When TU
Negative
 Law of Diminishing Marginal Utility

 When Consumer Consume More & More Unit of a Same

Commodity His Marginal Utility Falls and at the end point
He stop the consumption when he get maximum satisfaction. If

Consumer Consume One More Unit Marginal Utility Became

Negative
 Consumer Equilibrium
It refers the situation when a consumer is
having maximum satisfaction with his
limited income.
Equilibrium Means:- Get Maximum Satisfaction with his Limited
Income. {MU =Price }

Consumer Surplus
When Consumer get more Satisfaction with his limited Income
MU > Price = Consumer Increase Consumption

MU =Price = Consumer equilibrium

MU < Price = Consumer Decrease / Stop the consumption

 Meaning of Demand
 Demand Refers to the commodity or services
that the consumer are willing and able to
purchase at various price during a period of
time.
 Law of Demand
 { Desire } is the first element without desire , there will no desire
 { Mean to purchase } The person ,who desire for something ,must have means to fulfill
that desire

{ willing to use those mean to fulfill the desire} Only desire of

mean is not sufficient , what is sufficient willing to use those mean
to fulfill the desire.
Individual Demand Schedule
Price Quantity Negative Relation
{ Demand }
 Price increase demand decrease
5 1
4 2  Price decrease Demand Increase
3 3
2 4
1 5
Exceptions to the Law of Demand
Giffen Goods
Veblen Goods
Future Price Changes
Ignorance
Emergencies
Change in Fashion and Tastes & Preferences
Conspicuous Necessities
Bandwagon Effect
 Meaning of Market Demand
 Refers the Quantity Demanded of a Commodity by All Consumer a give price & time

Price
A Quantity price
B Quantity
Market Demand
5 1+2=3

5 1 5 2
4 2+6=8
4 2 4 6
3 3+8= 11
3 3 3 8
2 4+9=13
2 4 2 9
1 5+10 =15
1 5 1 10
 Assumption Of Demand

 Price of substitute goods do not change

 Price of Complimentary Goods do not change

 Income of Consumer Remain Same

 Determinants of Demand
1.Income:-A rise in a person’s Income will lead to an increase
in Demand {Shift demand curve to the right} a fall will lead
to a decrease in Demand for normal goods.
2. Consumer Preference: Favorable change leads to an increase in Demand,
unfavorable change lead to a decrease.

3. Number of Buyers :-The more buyers lead to an increase in demand, Fewer

buyers lead to Decrease.
 4.Price of related goods :Substitute goods {those that can be to replace each
other} :price of substitute and demand For the other good are directly related.

Causes of Increase in Demand

{ Situation when Demand Curve Shifts Forward ]

1. When Income of the consumer Increases

2. When price of Substitute Goods Increase.
3. When Price of Complimentary goods falls
4.When taste/preference of the consumer shift in favor of the Commodity { Due to change
in fashion or climate }.

5. When availability of the commodity is expected to reduce in the near future

Causes of Decrease in Demand

{ Situation when Demand Curve Shifts Backward }

1. When income of the Consumer Falls

2. When price of the substitute good Decrease.
3. When price of the Complementary good Decreases.
4.When taste /preference of the consumer shifts against the commodity { Due to change
in Fashion or climate }.

5.When availability of the commodity is expected to rise in the near future.

 Relationship Between Income and Demand
If Our Income rises , we generally tend to buy more of goods . More Income would mean more
pens ,more shirts , more cars , And so on . But there are exceptions. If initially you buying you are
buying coarse grain take your increase in income now

1.Normal Goods
These are the goods the demand for which increases as income of the buyers rises. There is a
positive relationship Between income and demand Or ,in case of normal goods income effect is
positive.
 2.Inferior Goods
These are the goods the demand for which decreases as income of buyers for which decreases
as income of buyers rises . These is inverse /negative relationship income and demand. Or, In
case of inferior goods, income effect is negative.