2.6.ppt-BUDGET LINE AND CONSUMER EQUILIBRIUM

BUDGET LINE AND CONSUMER EQUILIBRIUM

1. BUSINESS ECONOMICS
107
UNIT- 2
Faculty Name: Dr. Shuchi Singhal
Designation: Associate Professor
School/Dept: Management
Email address of Faculty Member: [email protected]

2. Programme Outcomes
2
PO1: Apply knowledge of various functional areas of business
PO2: Develop communication and professional presentation skills
PO3: Demonstrate critical thinking and Analytical skills for business
decision making
PO4: Illustrate leadership abilities to make effective and productive
teams
PO5: Explore the implications and understanding of the process of
starting a new venture
PO6: Imbibe responsible citizenship towards a sustainable society
and ecological environment
PO7: Appreciate inclusivity towards diverse cultures and imbibe
universal values
PO8: Foster Creative thinking to find innovative solutions for
various business situations

3. Course Objective and Course Outcomes
3
CO1:Understand the fundamental concepts of Business
Economics.
CO2:Analyze the relationship between consumer behaviour
and demand.
CO3:Explore the theory of production through the use of
ISO-QUANTS.
CO4:Understand the concept and relevance of short-term
and long-term cost.
CO5:Examine pricing decisions under various market
conditions.
CO6:Analyse economic challenges posed to businesses

4. Syllabus

5. Consumer Behavior and Demand
Analysis
2.1 CARDINAL UTILITY APPROACH: DIMINISHING MARGINAL UTILITY
2.2 CARDINAL UTILITY APPROACH: LAW OF EQUI- MARGINAL UTILITY
2.3 ORDINAL UTILITY APPROACH: INDIFFERENCE CURVES-Part 1
2.4 ORDINAL UTILITY APPROACH: INDIFFERENCE CURVES-Part 2
2.5 MARGINAL RATE OF SUBSTITUTION
2.6 BUDGET LINE AND CONSUMER EQUILIBRIUM
2.7 THEORY OF DEMAND
2.8 LAW OF DEMAND
2.9 MOVEMENT ALONG VS. SHIFT IN DEMAND CURVE
2.10 CONCEPT OF MEASUREMENT OF ELASTICITY OF DEMAND
2.11 FACTORS AFFECTING ELASTICITY OF DEMAND
2.12 INCOME ELASTICITY OF DEMAND, CROSS ELASTICITY OF DEMAND,
ADVERTISING ELASTICITY OF DEMAND
2.13 DEMAND FORECASTING: NEED, OBJECTIVE AND METHODS IN BRIEF
By: Shuchi Goel 5

6. 2.6
•Determinants of
Demand
6

7. 2.6 THEORY OF
DEMAND
By: Shuchi Goel 7

8. Suggested Readings
Author: Paul A. Samuelson & William D. Nordhaus
Title of the Book: Economics
Chapter’s Name: Basic Elements of Supply and Demand
Author: Christopher R. Thomas & S. Charles Maurice
Title of the Book: Managerial Economics-Foundations of
Business Analysis and Strategy
Chapter’s Name: Demand, Supply and Market Equilibrium
https://corporatefinanceinstitute.com/resources/knowledge/economics/demand-theory
/
By: Shuchi Goel 8

9. 2.6 THEORY OF DEMAND
Theory of Demand
•People demand goods because they satisfy the wants of the people.
•The demand for a commodity is the amount of it that a consumer will purchase
or will be ready to take off from the market at various given prices in a period of
time.
By: Shuchi Goel 9

10. Determinants of Demand:
The following factors influence the quantity demanded of a commodity:
1.Price of the commodity
2.Income of the Consumer
3.Price of Related Commodities
4.Tastes and Preferences of the Consumer
5.Consumers’ Expectations With Regard to Future Prices
6.Number of Consumers in the Market
By: Shuchi Goel 10

11. •An increase in the number of consumers in the market will increase the
demand for a good, and a decrease in the number of consumers will decrease
the demand for a good, all other factors held constant.
Demand Function: Q
d = f (P, Y, P
R, T, P
E, N)
By: Shuchi Goel 11

12. Conclusion
•Determinants of Demand:
1.Price of the commodity
2.Income of the consumer
3.Price of related goods
4.Tastes and preferences of the consumer
5.Consumer’s expectations with regard to future prices
6.Number of consumers in the market
By: Shuchi Goel 12