Fundamentals of economic terms

INCOME DEMAND -  Income demand is related to the quantity of goods and services demanded by a consumer at different income levels in a given period of time.

Income demand depends on nature of goods

1)      Superior goods

2)      Inferior goods

1)Superior goods- superior goods are those goods when the income increases of a consumer demand of goods also increases.

Example

a) I started working on a company in 2015 that time my income was 5000 per month. So, the quantity demanded of pulse is 5 kg per month but when the income increases by 8000 in 2017 then my quantity demanded of pulse also increases that is 20 kg per month.

b) I started working on a company in 2015 that time my income was 5000 so I preferred bus to go office but when my salary increases by 8000 I preferred my bike to go office.  So when my income was low I had less demand of petrol but when my salary increases and I started using bike demand of petrol increases.

2 )  Inferior goods –  inferior goods are those goods when the income of consumer is increases then the demand will decreases and vice- versa.

Example-

a) I started working on a company in 2015 that time my income was 5000 per month. So, the quantity demanded of jaggery is 1 kg per month but when the income increases by 8000 in 2017 then my quantity demanded of jaggery decreases that is 250 gm kg per month.

b) I started working on a company in 2015 that time my income was 5000 so I preferred bus to go office but when my salary increases by 8000 I preferred my bike to go office.  So when my income was low I was preferring bus to go but when my income increases i deceases the demand of bus.

CROSS DEMAND – It refers to different quantities of a commodity that the consumer purchase per unit of time at different prices of a related commodity, other things remain constant.

Cross demand depends upon type of cross demand

  1) substitute goods

  2) complementary

1)  substitute goods – these goods are those goods which we use in place of each other.

Example –

a      a)  One day I went to grocery store I preferred tea but tea was not available there so I preferred   coffee in place of tea because these goods are substitute goods we can use both in place of each     other.

b      b) On day in my college life I went to buy a sweater to in a shop I asked to shopkeeper for sweaters but there was not available sweaters .so, I purchased sweat-shirts. because these goods are substitute goods and these goods give equal satisfaction to customer.

2) complementary goods –

 complementary goods are those goods which are jointly demands to satisfy same want.

 Example –

 a) one day I went d-mart for shopping some goods. I purchased one pocket of bread now if I want to eat bread I have to buy butter also so I purchased butter also to satisfy same want. So we can say that bread and butter are complementary goods.

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b) when I was in class 12^th I purchased a bike if I want to ride a bike so I have to buy petrol also so I purchased petrol also because bike and petrol are complementary goods I have to buy both for satisfy same want.

OPPORTUNITY COST

The cost of sacrificing one opportunity for another opportunity known as opportunity cost.

Example –

  a) After my graduation I had two choices either I could have take admission in IBA-BANGALORE with fee 7,00000 rupee or I could take admission in PIBM-PUNE with fee rupee 10,00000 but I chose IBA for my higher study so I lost one opportunity of PIBM. so it is opportunity cost for me.

  b) when I was in class 12^th my father was about to buy a mobile for me he  gave two choices for me either I can buy a Samsung mobile for rupee 10000 or I can buy a mobile of vivo for rupee 12000 then I chosen vivo mobile so I lost one another opportunity of  Samsung mobile for rupee 10000 it is opportunity cost for me.