Know Our life From Economics Point Of View

Law Of Demand :-

It is the inverse relationship between the price of a goods and the quantity .
Example:-

• In flipkart when big billion day come people do more shopping because, we get discount and prices are low.

• If we are going to market and see different type of apple with different rate like 100 rs/kg and 60 rs/kg. A buyer can willing and able to buy 2 kg of first one then customer can buy 4 kg of last one.

Law of Supply:-

 It says that when price goes up quantity goes up and vice-versa.
Example:-

• When any popular celebrity come for concert, price of ticket is high so event team provide more ticket for benefit.

• When price of  onion start decreasing the producer decrease the supply of onion in market.

Elasticity:-

It is a measure of the sensitivity of one variable to another.

Example:-

• When the price of Postpaid service  is increase we are switch to prepaid service.
• D Mart gives us discount that is benifbenef for us so many customers of Big Bazar are move to D Mart

Consumer Surplus:-

 It is the different between the price consumer willing to pay and consumer actually pay.
Example:-

• I want to buy new mobile and my budget is 10000. I search a mobile and I find a mobile of 10000. But I have to pay only 9000 because there was 10% off using SBI Credit card and that 1000 is consumer surplus.

• When we go to the  Reliance mall for buy product a  with certain budget and we see that Reliance giving 50% off in that product and we buy happily. That 50% off is the Consumer Surplus.

Producer Surplus:-

It is the difference between the producer is willing to sell and the price actually sold.
Example:-

• I want to sell my bike at 35 k for buy a new bike. After market research i find that the price of my bike is 40 k and I sold it at 40 k at Olx.com. Here 5000 is producer surplus.

• When we go to the market and ask a shopkeeper price about a shirt they say 1000 though they want sell it at 500 and after bargaining we buy it at 700. Here 200 is producer surplus.

The Supply Elasticity

Elasticity of Supply

Definition of Elasticity:

Ever think of finding out the comparison level of two variable? Well, Elasticity is the best option. Elasticity refers to the measure of the sensitivity of one variable if the other changes. For example, Advertising elasticity is the relationship between the ad budget and the changes in sales volume.

Economists are often  interested in elasticity of demand and elasticity of supply.

The scenario of elasticity can be of three types mainly
1. When elasticity is greater than 1 i.e elastic situation
2. When elasticity is less than one i.e inelastic situation
3. When elasticity is equal to one i.e unitary elastic situation

Elasticity has various determinants which are as below

Elasticity is one of the prime factor to consider in managerial as well as business decision making.
It helps in deciding proper price, channeling the supply and handling the demand to make business successful.

Elasticity of Supply

The elasticity of supply is a measure of a company’s ability to increase or decrease production in response to a price change. It is also referred to as the price elasticity of supply.

Why it matters

Elasticity of supply tells us how fast supply responds to quantity demand and price increase. When there is a popular product that is in short supply for instance, the price may rise as a result. The manufacturers of that product will increase output (the supply) to keep up with the demand. The higher the elasticity of supply, the faster the supply will increase when demand and price increase. Some goods/services are more supply inelastic however, whenever there is a supply shortage. Limited tickets to a concert may have a very inelastic supply. The price of the concert tickets can be raised to any amount, but because there is a fixed number of seats and tickets, the supply (of tickets sold) may not be increased by much if at all.

Supply Determinants

• Flexibility of inputs

When you go to hotel, the most important person is chef. If chef is absent nothing will go, chef cant be replaced.

• Mobility of inputs

Theater group, they will be performing in different countries, different events. But the machineries are not easy to relocate.

• Durability

• Time

Drivers are elastic inputs but if you have a urgent meeting and that driver become unavailable for that time period that moment he cant be replaced.

• Ability to produce substitutes inputs

If anything can be substituted then inelastic goods is turned into elastic.

DEMAND AND SUPPLY

DEMAND
Demand refers to the number of goods or services the consumer willing to purchase at any given period of time.

LAW OF DEMAND
The law of demand states the price rises when the quantity demand falls and vice versa other things remaining constant.
Example: Suppose, the price of a potato tends to rise in that case people will buy less quantity of potato. On the other hand, if the price of the potato falls, in this case, people will buy potatoes in bulk so that to avoid buying potatoes in huge amount afterwards.

DEMAND CURVE
The demand curve is the graphical representation of the law of demand. It is drawn with price in the vertical axis and quantity demand on the horizontal. The graph represents the curve as downward sloping from left to right because the price is inversely proportional to quantity demand i.e lower the price higher the quantity demand and vice versa.

                                             

SUPPLY
Supply refers to the willingness of the seller or producer to sell good or services at different prices.

LAW OF SUPPLY
Law of supply states that the increase in the price results in the increase in the quantity supply and vice versa other things remaining constant.

Example: There is a drought and very few strawberries are available. More people want the strawberries than there are berries available. The price of strawberries increases dramatically.

SUPPLY CURVE

The supply curve is a graphical representation of the law of supply. It is drawn with price in the vertical axis and quantity supply in the horizontal axis. The graph represents the curve as upward sloping from left to right because the price is directly proportional to quantity supply i.e higher the price, higher the quantity supply and vice versa other things remaining constant.

           

                           

FACTORS AFFECTING DEMAND OF PRODUCT
1. Price of the commodity
2. Price of Related Goods
3. Income of the Consumer
4. Taste and Preference
5. Future price Expectations

FACTORS AFFECTING SUPPLY OF PRODUCT
1. Price of the given commodity
2. Cost of Production
3. Technology
4. Taxation Policy
5. Factors of Production
6. Objectives of the firm

Cost Benefit Analysis

Concept of Cost Benefit Analysis:

• Cost benefit is a tool which modern financial analysts adopt before undertaking any financial operations or commercial activity.
• The ultimate aim of a business organization is to make profits.
• Therefore, any system in the organization must produce more benefits as compared to its costs for the organization to survive and prosper.

What is Cost Benefit Analysis?

•  A cost benefit analysis is done to determine how well a planned action will turn out.
• The analysis relies on the addition of positive factors and the subtraction of negative ones to determine a net result.
• Cost Benefit Analysis has been established primarily as a tool for use by governments in making their social and economic decisions.
• Cost Benefit Analysis measures costs and benefits to the community of adopting a particular course of action.

COST	BENEFIT
Any negative effect on an organization resulting from the implementation of the project. Examples: Maintenance costs Environment Research and development Labour Costs	A benefit is any positive effect on the organization resulting from the implementation of the project. Examples: Increase in productivity. Reduction in Costs. Saving Time.

The General Steps of Cost Benefit Analysis are:

1.        Specifying the project clearly
2.        Describe quantitatively the inputs and outputs of the program
3.        Estimate the Social cost and benefits of these inputs and outputs of the program
4.        Compare these benefits and costs