1. Law of Demand
Demand: Demands for Any commodity refers to an amount
that
Ø
Ability
to buy
Ø
Willingness
to pay
Ø
At
a given price
Ø
at a particular time
Ø
Desire
of a commodity
Example:
Ø
I
have a desire to buy a Royal Enfield when I was in plus 2 but my dad does not
allow me to buy that bike. This is not a demand because I have a desire for
commodity but don’t have a ability to buy.
Ø Suppose
in the same case if the rich person son wants to buy bullet we can say this it
is a demand because he has desire and have ability to buy the bike.
Ø
I
have a desire to purchase Nike shoes and have ability to buy it but I am not
willing to pay this is not a demand
·
When
we say is it demand? if it satisfies all the above five factors of demands then
it is called a demand.
Law of demand:
Law of
demand says that when price rises demand contracts and when price falls demand
expands.
“Therefore, there is an inverse relationship between price and demand”
Example:
When the price of
nike shoes are rises the demand for nike shoes are contracts
When the price of nike shoes are falls
the demand for nuke shoes expands
2. Law
Of Supply
Supply: He /She willingness to sell
Ø
At
a particular point of time
Ø
At
a particular price
Ø
Ability
to sell depends upon availability of stock
Example:
I want to sell my gear cycle when I was in 1oth
because I have ability to sell and I am willing to sell this is called supply.
Example 2 :
I want to
sell my Samsung s3 mobile when I was in plus 2 I have ability to sell but I am
not willing to sell this is not a supply.
Law of Supply:
Ø
It
says that when price increases supply also increases
Ø
Supply
also state with price.
Ø
When
price increases supply also increases.
Ø
When
price falls supply also falls.
“There is a positive relationship between
price and supply”.
Example: we have air conditioner shop in our hometown.
We used to sell more air conditioners in summer season when compared to winter
reason. The demand is more in summer season for air conditioner and the price
for air conditioner also more.
3. Determinants of Demand
& Supply
Determinants of demand:
Ø
Tastes
& Fashions
Ø
Substitutes
& Compliment
Ø
Income
Income:
Normal goods:
Example 1: when I was doing graduate I used to do part time jobs.
At first time I was getting only 5000 rs per month I used to take in snacks
bread which costs 5 rs. After six months my salary was increased by 50 % then I
go for egg puffs.
Example 2:
When I was
in 7th class my dad income was 35000 rs per month at that time we
have electronic cooler in my home . when I came in 10th class my
father income was increased by 60 % then my father go for Air conditioner.
Determinants of supply:
Ø
Costs
of production
Ø
Profitability
of alternative goods in supply
Ø
Nature
random shocks
Ø
Future
prices
Profitability of alternative goods
in supply:
Example 1:
My
neighbour is a farmer he makes a great profit from mangoes than rice. Here supply
of rice decreases and Supply of mangoes increases.
Example 2:
My brother-in-law has a non veg restaurant in
that he used to sell more mutton biriyani than chicken biriyani later he realised
that more customers are preferring for chicken biriyani so he changed the strategy
from that day he sell more chicken biriyani
In this case Supply of
mutton biriyani decreases and supply of chicken biriyani increases. When supply
increases of chicken automatically the price of chicken also increases.
4. Producer Surplus
Producer Surplus:
The
difference between the amount of producer willing to sell in the market and the
amount actually received after trade.
Example1:
My
neighbour has Electronic appliances he sells the Electric tower fan at 8000 rs
normal.
when
summer season came he increased the price of tower fan at 9500 rs.
Here the
producer surplus is (9500- 8000) = 1500 is producer surplus.
Example 2:
My uncle has a boutique shop in which all the
ladies wear is available The prices of night wears are increased in summer
season normally he used to sell night wear 500 rs per pair. In summer season he
sells 700 rs here the producer surplus is 200 rs i.e. (700-200).
5.Consumer
surplus
Consumer surplus:
The
difference between the amount consumer willingly and able to pay to buy any
goods or services and the amount consumer actually pays to buy the products and
services.
Example 1:
I went to shop to purchase a T shirt the
seller said it costs 800 rs I negotiate for 600 rs here the consumer surplus is
200 rs i.e.(800- 600)=200
Example 2:
When I was in intermediate I went to purchase
a second hand bike the seller said it costs 66,500 rs I negotiate for 63,000. Here
the consumer surplus is 3,500 rs i.e.(66,500-63,000)
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