MANAGERIAL _ECONOMICS _SEC A PART 2.pptx

Nature of Managerial Economics - IntellipaatManagerial economics is the application of economic principles and theory to business decision-making to help managers make more informed choices regarding the efficient use of scarce resources. It bridges the gap between economic theory and business practice by applying tools like microeconomic analysis to practical problems such as pricing, production, and capital allocation.

1. Managerial Economics ODMCM111T M.COM I SECTION - A PART - 2

2. CONTENT MEANING OF DEMAND DETERMINANTS LAW OF DEMAND : MEANING EXCEPTIONS KINDS OF DEMAND CHANGE IN DEMAND

3. DEMAND DEMAND IS THE QUANTITY OF A COMMODITY THAT A CONSUMER IS WILLING AND ABLE TO BUY AT EACH POSSIBLE PRICE DURING A GIVEN PERIOD OF TIME. INDIVIDUAL DEMAND REFER TO THE QUANTITY OF A COMMODITY THAT A CONSUMERS IS WILLING AND ABLE TO BUY ,AT EACH POSSIBLE PRICE DURING A GIVEN PERIOD OF TIME MARKET DEMAND REFER TO THE QUANTITY OF A COMMODITY THAT ALL CONSUMERS ARE WILLING AND ABLE TO BUY ,AT EACH POSSIBLE PRICE DURING A GIVEN PERIOD OF TIME.

4. DEMAND SCHEDULE TABULAR PRESENTATION OF QUANTITY DEMANDED UNDER DIFFERENT POSSIBLE PRICES OF A PRODUCT . IT SHOWS THE RELATION BETWEEN PRICE OF A PRODUCT AND QUANTITY DEMANDED BY THE CONSUMER WITH REFERENCE TO THAT PARTICULAR PRICE .

5. INDIVIDUAL DEMAND SCHEDULE INDIVIDUAL DEMAND SCHEDULE IS A TABLE SHOWING THE QUANTITY DEMANDED BY AN INDIVIDUAL UNDER THE DIFFERENT POSSIBLE PREVAILING IN THE MARKET PRICE OF ORANGES QUANTITY DEMANDED 1 4 2 3 3 2 4 1

6. MARKET DEMAND SCHEDULE MARKET DEMAND SCHEDULE IS A TABLE SHOWING THE QUANTITY DEMANDED BY ALL THE CONSUMERS IN THE MARKET UNDER THE DIFFERENT POSSIBLE PRICES PREVAILING IN THE MARKET PRICE A’S DEMAND B’S DEMAND TOTAL DEMAND(A+B) 1 4 5 9 2 3 4 7 3 2 3 5 4 1 2 3

7. DEMAND CURVE DEMAND CURVE IS A GRAPHICAL / DIAGRAMMATICAL PRESENTATION OF DEMAND SCHEDULE SHOWING THE RELATION BETWEEN QUANTITIES DEMANDED BY A CONSUMER UNDER DIFFERENT MARKET PRICES INDIVIDUAL DEMAND CURVE MARKET DEMAND CURVE

8. INDIVIDUAL DEMAND CURVE INDIVIDUAL DEMAND CURVE IS A GRAPHICAL / DIAGRAMMATICAL PRESENTATION OF INDIVIDUAL DEMAND SCHEDULE SHOWING THE RELATION BETWEEN QUANTITIES DEMANDED BY INDIVIDUAL CONSUMER UNDER DIFFERENT MARKET PRICES.

9. MARKET DEMAND CURVE MARKET DEMAND CURVE IS GRAPHICAL / DIAGRAMMATICAL PRESENTATION OF MARKET DEMAND SCHEDULE SHOWING THE RELATION BETWEEN QUANTITIES DEMANDED BY ALL CONSUMERS UNDER DIFFERENT MARKET PRICES

10. DETERMINANTS OF DEMAND (INDIVIDUAL DEMAND ) 1)PRICE OF THE GIVEN COMMODITY : THERE EXISTS AN INVERSE RELATIONSHIP BETWEEN PRICE AND QUANTITY DEMANDED. IT MEANS, AS PRICE INCREASE , QUANTITY DEMANDED FALLS DUE TO DECREASE IN THE SATISFACTION LEVEL OF CONSUMERS. 2)PRICE OF RELATED GOODS :DEMAND FOR THE GIVEN COMMODITY IS ALSO AFFECTED BY CHANGE IN PRICES OF THE RELATED GOODS. SUBSTITUTE GOODS : ARE THOSE GOODS WHICH CAN BE USED IN PLACE OF ONE ANOTHER FOR SATISFACTION OF A PARTICULAR WANT, LIKE TEA AND COFFEE. AN INCREASE IN THE PRICE OF SUBSTITUTE LEADS TO AN INCREASE IN THE DEMAND FOR GIVEN COMMODITY AND VICE VERSA.

11. DETERMINANTS OF DEMAND (INDIVIDUAL DEMAND ) COMPLEMENTARY GOODS : ARE THOSE GOODS WHICH ARE USED TOGETHER TO SATISFY A PARTICULAR WANT LIKE TEA AND SUGAR.AN INCREASE IN THE PRICE OF COMPLEMENTARY GOODS TO A DECREASE IN THE DEMAND FOR GIVEN COMMODITY AND VICE VERSA. 3)INCOME OF THE CONSUMER : THE EFFECT OF CHANGE IN INCOME ON DEMAND DEPENDS ON THE NATURE OF THE COMMODITY UNDER CONSIDERATION . IF THE GIVEN COMMODITY IS A NORMAL GOOD , THEN AN INCREASE IN INCOME LEADS TO RISE IN THIS DEMAND , WHILE A DECREASE IN INCOME REDUCES THE DEMAND

12. DETERMINANTS OF DEMAND (INDIVIDUAL DEMAND ) INCOME OF THE CONSUMER: IF THE GIVEN COMMODITY IS AN INFERIOR GOOD , THEN AN INCREASE REDUCES THE DEMAND , WHILE A DECREASE IN INCOME LEADS TO RISE IN DEMAND . 4)TASTES AND PREFERENCES: OF CONSUMER DIRECTLY INFLUENCE THE DEMAND FOR A COMMODITY. 5) EXPECTATION OF CHANGE IN THE PRICE IN FUTURE: IF THE PRICE OF A CERTAIN COMMODITY IS EXPECTED TO INCREASE IN NEAR FUTURE, THEN PEOPLE WILL BUY MORE OF THAT COMMODITY THAN WHAT THEY NORMALLY BUY. THERE EXISTS A DIRECT RELATIONSHIP BETWEEN EXPECTATION OF CHANGE IN THE PRICES IN FUTURE AND CHANGE IN DEMAND IN THE CURRENT PERIOD.

13. DETERMINANTS OF DEMAND (MARKET DEMAND ) MARKET DEMAND IS INFLUENCED BY ALL THE FACTORS AFFECTING INDIVIDUAL DEMAND FOR A COMMODITY. SIZE AND COMPOSITION OF POPULATION : INCREASE IN POPULATION RAISES THE MARKET DEMAND , WHILE DECREASE IN POPULATION REDUCES THE MARKET DEMAND SEASON AND WEATHER : ALSO AFFECT THE MARKET DEMAND FOR A COMMODITY. DISTRIBUTION OF INCOME : IF INCOME IN THE COUNTRY IS EQUITABLY DISTRIBUTED THEN MARKET DEMAND FOR COMMODITIES WILL BE MORE. HOWEVER IF INCOME DISTRIBUTION IS UNEVEN I.E PEOPLE ARE EITHER VERY RICH OR VERY POOR THEN MARKET DEMAND WILL REMAIN AT LOWER LEVEL.

14. LAW OF DEMAND STATES THE INVERSE RELATIONSHIP BETWEEN PRICE AND QUANTITY DEMANDED KEEPING OTHER FACTORS CONSTANT (CETERIS PARIBUS) PRICE QUANTITY DEMANDED PRICE QUANTITY DEMANDED CETERIS PARIBUS: OTHER THINGS BEING CONSTANT OR UNCHANGED

15. ASSUMPTIONS OF LAW OF DEMNAND PRICES OF SUBSTITUTE GOODS DO NOT CHANGED. PRICES OF COMPLEMENTARY GOODS REMAINS CONSTANT INCOME OF THE CONSUM ER REMAINS THE SAME THERE IS NO EXPECTATION OF CHANGE IN PRICE IN THE FUTURE TASTES AND PREFERENCES OF THE CONSUMER REMAIN THE SAME

16. EXCEPTIONS TO LAW OF DEMAND 1) STATUS SYMBOL GOODS OF OSTENTATION : CERTAIN PRESTIGE GOODS WHICH ARE USED AS STATUS SYMBOLS . EXAMPLE: DIAMOND, GOLD , ANTIQUE PAINTING ETC. PRICE ARE HIGH DEMANDED MORE 2) FEAR OF SHORTAGE : DUE TO EXPECTED SHORTAGE OF PARTICULAR COMMODITY , DEMAND INCREASES EVEN AT HIGH PRICES. 3) IGNORANCE : CONSUMER MAY BUY MORE OF A COMMODITY AT A HIGHER PRICE WHEN THEY ARE IGNORE OF THE PREVAILING PRICES OF THE COMMODITY

17. EXCEPTIONS TO LAW OF DEMAND 4) FASHION RELATED GOODS :DEMAND INCREASES EVEN WITH A RISE IN THEIR PRICES. 5) NECESSITIES OF LIFE :COMMODITIES LIKE RICE , WHEAT , SALT , MEDICINES ETC. ARE PURCHASED EVEN IF THEIR PRICES INCREASE. 6) CHANGE IN WEATHER : WITH CHANGE IN SEASON / WEATHER, DEMAND FOR CERTAIN COMMODITY CHANGES IRRESPECTIVE OF PRICES.

18. KINDS OF DEMAND PRICE DEMAND :REFERS TO A RELATIONSHIP BETWEEN THE PRICE AND DEMAND OF A COMMODITY , ASSUMING OTHER FACTOR CONSTANT . Dx= f( Px ) D = DEMAND FOR THE GIVEN COMMODITY f= FUNCTIONAL RELATIONSHIP Px = PRICE OF THE GIVEN COMMODITY

19. CROSS DEMAND REFERS TO A RELATIONSHIP BETWEEN THE DEMAND OF A GIVEN COMMODITY AND THE PRICES OF RELATED COMMODITIES , ASSUMING OTHER THINGS REMAINING THE SAME.

20. INCOME DEMAND REFERS TO A RELATIONSHIP BETWEEN THE INCOME OF CONSUMER THE QUANTITY DEMANDED OF A COMMODITY, ASSUMING OTHER FACTORS CONSTANT Dx=f(Y) Dx =DEMAND FOR THE GIVEN COMMODITY f=FUNCTIONAL RELATIONSHIP Y= INCOME OF THE CONSUMER

21. JOINT DEMAND WHEN TWO OR MORE GOODS ARE DEMANDED SIMULTANEOUSLY TO SATISFY A PARTICULAR WANT , THEN SUCH DEMAND IS CALLED JOINT DEMAND

22. COMPOSITE DEMAND WHEN A COMMODITY CAN BE PUT TO SEVERAL USES, ITS DEMAND IS KNOWN AS COMPOSITE DEMAND

23. DERIVED DEMAND DEMAND FOR A COMMODITY , WHICH DEPENDENT ON DEMAND FOR OTHER GOOD IS KNOWN AS DERIVED DEMAND . DIRECT DEMAND : WHEN A COMMODITY SATISFIES THE WANTS DIRECTLY ITS DEMAND IS TERMED AS DIRECT DEMAND ALTERNATIVE DEMAND :DEMAND IS KNOWN AS A ALTERNATIVE DEMAND ,WHEN IT CAN BE SATISFIED BY DIFFERENT ALTERNATIVES.

24. CHANGE IN DEMAND CHANGE IN DEMAND OR SHIFT IN THE DEMAND CURVE DUE TO CHANGE IN ANY OF THE FACTORS THAT WERE ASSUMED CONSTANT UNDER THE LAW OF DEMAND . THE CHANGE MAY BE EITHER AN INCREASE IN DEMAND OR DECREASE IN DEMAND

25. INCREASE IN DEMAND AN INCREASE IN DEMAND ( ASSUMING NO CHANGE IN SUPPLY ) LEADS TO A RIGHTWARD SHIFT CURVE

26. DECREASE IN DEMAND IN CASE OF DECREASE IN DEMAND (SUPPLY REMAINING UNCHANGED ) , DEMAND CURVE SHIFTS TO THE LEFT .

27. FEATURE OF LAW OF DEMAND THERE IS AN INVERSE RELATIONSHIP BETWEEN PRICE AND QUANTITY DEMANDED. PRICE IS AN INDEPENDENT VARIABLE AND DEMAND IS A DEPENDENT VARIABLE GENERALLY THE DEMAND CURVE SLOPES DOWNWARDS FROM LEFT TO RIGHT

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