# DEMAND,#SUPPLY#UTILITY#LAW OF DEMAND#CARDINAL &ORDINAL.

DEMAND AND SUPPLY :

DEMAND:-

CONSUMER IS WILLING AND ABLE TO PAY AT POSSIBLE PRICE AT GIVEN TIME PERIOD.

DEMAND INCLUDE INTEREST.

EX1. SUPPOSE I WANT TO BUY A CAR AND PRICE OF CAR IS RS 7,00000 LAKH, BUT IT IS BEYOND OF MY EXPECTATION ,I CANT AFFORD THAT MUCH PRICE.

SO THE DEMAND OF CAR AT THAT PRICE IS 0.

EX2.SUPPOSE I AM WILLING TO BUY APPACHIE BIKE, AND I CAN AFFORD THE PRICE OF RS 9,50000,BUT DUE TO ITS LOW MILLAGE,IM NOT WILLING TO BUY, SO HERE INTEREST GOES OUT FOR APPACHE BIKE.

SO WE CAN SAY THAT DEMAND INCLUDE INTEREST AND WILLINGNESS.

SUPPLY

IT IS DEFINED AS, THE AMOUNT OF QUANTITY PRODUCER IS WILLING TO SALE AT MINIMUME PRICE FOR THE GIVEN TIME PERIODE.

EX1: SUPPOSE RAM IS FRUITE SELLAR AND SELLS APPLE 500KG AT RS200/KG OF RS 10,0000 DURING JANUARY AND APRIL.

EX2: AND 350 KG AT RS 250/KG OF RS87,500 DURING JUNE TO OCTOBER , IN THIS TWO CASES THE QUANTITY AND PRICE ARE DIFFERENT.

SUBSTITUTION EFFECT OF A PRICE CHANGE:-        

PRICE OF ONE GOODS CHANGES WITH RESPECT TO OTHER THE SUBSTITUTION EFFECT OCCURS. .

EX1: SUPPOSE THE PRICE OF TEA AND COFEE IS RS 10. IF THE PRICE OF COFEE WOULD GET INCREASED RELATIVE TO TEA, THEN CONSUMER WILL CONSUME MORE TEA THEN COFEE. HERE SUBSTITUTION EFFECT APPLIED.

NOTE:IF THE PRICE OF TEA AND COFFE CHANGED WITH SAME % THEN SUBSTITUTION EFFECT NO OCCURE.

EX2: RAM USED TO TAKE ORANGE JUICE OF RS 20, NOW JUICE PRICE HIKED BY 25%,RELATIVE TO BANANA. NOW RAM IS WILLING TO TAKE BANANA DUE TO INCREASE IN PRICE OF ORANGE JUICE HERE SUBSTITUTION EFFECT OCCURES.

    THE INCOME EFFECT OF A PRICE CHANGE

 IT DESCRIBE, THAT IF THE INCOME OF A PERSON REMAIN CONSTANT,AND REDUCE IN THE PRICE OF COMODITY, INCREASES THE ABILITY TO PURCHASE GOODS MORE.

EX:1SUPPOSE MY INCOME IS RS 300 PER WEEK & I PURCHESE PIZZA RS150/PIECE. PER WEEK I BUY 2 PIZZA,IF THE PRICE OF PIZZA GET REDUCE BY RS 50,THEN PURCHESING POWER WILL BE INCREASES AND

I CAB BUY 3 PIZA IN A WEEK,,OR WE CAN SAY THAT MY INCOME GET INCREASES AS COMPARE TO PIZZA.

IF I BUY 2 PIZZA ONLY ,I HAVE THE OPPERTUNITY TO BUY OTHER GOODS, DUE TO DECREAS IN PRICE OF PIZZA.

NOTE:CHANGE IN PRICE, CHANGE THE REAL INCOME OF A PERSON.SO REAL INCOME OF A PERSON ALWAYS NO T BE SAME.

UTILITY AND LAW OF DIMINISHING UTILITY:

UTILITY:-

TOTAL SATISFACTION GAIN FROM CONSUMING A PARTICULAR COMMODITY OTHER THING REMAIN CPONTANT.

EX: SUPPOSE I AM FILLING THURSTY & WILLING TO TAKE WATER,I TOOK 4 GLASS OF WATER AND I COMPLETED MY APPETITE.SO TOTAL SATISFACTION GAIN FROM 4 GLASS OF WATER IS TOTAL UTILITY.

UNIT OF UTILITY:

CARDINAL:IN CARDINAL UTILITY CAN BE MEASURED,SUPPOSE I TAKE 1 GLASS OF WATER AND I IT CAN BE APPLICABLE FOR SINGLE OR DOUBLE COMMODITY CAN BE MEASURED.

10 UNIT OF SATISFACTION,HERE WE CAN NOT DO RANKING.

IT CAN BE APPLICABLE FOR SINGLE OR DOUBLE COMMODITY CAN BE MEASURED.

ORDINAL:IN THIS CASE UTILITY CAN BE RANKED.

SUPPOSE I WENT TO MALL AND LOOKING FOR T-SHIRT,I LOOKING FOR WHICH IS SITABLE FOR ME AMONG DIFFERENT COLOUR. SO HERE I AM GIVING RANK FOR THE T-SHIRT.IN THIS CASE ONLY DOUB COMMODITY IS CONSIDER.