Main market forms easy notes part 1

Market refers to the whole region where buyers and sellers of a commodity are in contact with each other to effect purchase and sale of the commodity. (matlab jha buyers aur seller ek saath mile. vo ho gya market)

few things which define the market structure
 1- jha jaada buyers and seller honge market utni hi badi hogi.
2-nature of commodity ki commodity kaunsi hai. ya to saari market mai same hi commodity mil ri hai ya phir alag alag.
3-freedom to move the firm. hum kahi bhi firm ko le jaa paaye
4-buyers and seller have full knowledge about the product. ki ye kitne ka hai. ye product mai kya hai etc.

Perfect competition
perfect competition refers to a market situation where there are very large number of buyers and seller dealing in a homogeneous product at a price fixed by the market.

*bhut badi market hoti hai ek hi jagay pe
*sab same saaman bechte hai. koi alag ni bechega
*prices same hote hai customer ko koi chutiya ni bana sakta
*koi bhi aa sakta hai jaa sakta hai koi restriction nahi hai

Ise price taker bhi kehte hai kyuti price koi jaada bhi ni kar sakta na koi kam

isme demand aur supply same rehti hai kyuki koi firm mai price ka koi differentiation nhi rehta
to demand aur supply cross shape banate hai. Aur ye price taker hai islia demad aur supply same rehti hai aur AR aur MR same rehta hai

Revenue #easy notes

                                                            REVENUE

Revenue refers to the amount received by a firm from the sale of a given quantity of a commodity in the market.

Total revenue
total revenue = price*quantity

Average revenue
average revenue = TR/quantity

Marginal revenue
Marginal revenue = neeche vaale TR se uppar vaale TR ko minus kar do

-----------------------------------------------------------------------------------------------------------------
If price remain constant AR is equal to MR

---------------------------------------------------------------------------------------------------------------------
When price fall and rise in output
AR decreases and MR decreases more faster

------------------------------------------------------------------------------------------------------------------------
general relationship b/w AR and MR
AR rises MR also rises
when AR is equal to MR. AR starting falling
After AR started falling Mr is less then AR

exam mai general relationship aaya to bina value likhe diagram banana


aur agar price remain contant mai to AR aur MR equal hote hai
aaur price decrease hota hai to AR aur MR fall karte hai bas MR jaada fall hota hai

--------------------------------------------------------------------------------------------------
TR aur MR mai vaisa hi same relationship hai jaisa humne TU aur MU mai pada tha bas ek hi difference hai

TR increase MR decereases
TR is in maximum MR is at 0
TR started falling MR go on negative

(jab price decrease ho ra ho tab esa hoga)
-----------------------------------------------------------------------------------------------------------------
Break even point
When TR is equal to TC that point is break even point
Ar jab AR is equal to AC

 

--------------------------------------------------------------------------------------------------------
Shut down point
Shut down point refers to a situation when a firm is able to cover its variable cost
matlab company ke paas itna paisa nahi aaya profit mai ki vo total cost bhi nikal paaye usse
vo khali variable cost nikal paayi

 

Cost most easy notes

                                                                     COST

We all know what is cost. But in economics cost means it is a total expenditure which include explicit cost  and implicit cost.

Explicit cost-it is the actual money expenditure on inputs or payment made to outsiders for hiring their factor services. like wages paid, rent paid, payment of raw material.
isme actual money dia jaata hai

-----------------------------------------------------------------------------------------------------------------
Implicit cost-it is the estimated value of the inputs supplied by the owners including normal profit.(apne hi factors pe kharcha implicit cost hota hai) interest on own capital,rent for own land etc
isme koi money involve nhi hota




Total Fixed cost (TFC) or fixed cost
Fixed costs refers to those costs which do not vary directly with level of output (matlab output kitna bhi bad jaaye fixed cost same hi rahegi) iska diagram straight line banega

Total variable cost (TVC) or variable cost
Variable costs refers to those cost which vary directly with level of output (output badega to variable cost bhi badte rahega) iska shape 'S' ki tarah hota hai. really s ki tarah ni hota par exam mai yeh hi likhne.

Total cost
total expenditure TFC+TVC total cost hua

*TFC kabhi bhi 0 nahi hota
*TVC can be changed on short run but TFC cant be changed

Relation b/w tfc tvc and tc
*tfc hamese straight rehta hai
*tvc aur tc S shaped ke hote hai
*tvc aur tc pehle decreasing rate se increase hote hai phir constant hote hai phir increase hote hai increasing rate pe.
* 0 output pe tc tfc ke barabar hota hai aur tvc 0 hota hai
-------------------------------------------------------------------------------------------------------------
Average fixed cost
it refers to the per unit fixed cost of production
Matlab total fixed cost jo ki hamesa same rehti hai usse output se divide kare.
Average fixed cost kabhi bhi 0 pe ni aata

Average variable cost
average variable cost refers to the per unit variable cost of production
Matlab total variable cost jo hamesa increase hota hai usse output se divide kar dia
Average variable cost U shaped ka hota hai

Average cost
Average fixed cost+ average variable cost =Average cost

--------------------------------------------------------------------------------------------------------------
Marginal cost
Marginal cost is the additional to total cost when one more unit of output is produced

Total cost -tvc+tfc
uppar vaali value ko neeche se minus kar dia aa jayega marginal cost

----------------------------------------------------------------------------------------------------------------

best hai pehle value likho phir diagram banao apne aap relationship ban jayega

 

Production fuction whole chapter in 1 page

                                  Production function

 

Production function expresses the technological relationship between physical inputs and physical quantities of output (yeh to yaad kar lo)
----------------------------------------------------------------------------------------------------------------------

Short run
Short run refers to a period in which output can be changed by changing only variables factors.(variable factors jaise numbers of worker ,raw material etc. inko badane se production badana is short run.

Long run
Long run refers to period in which output can be changed by changing all factors of production.(sabhi kuch badal ke production badana like factory size, new techniques of production, new machines etc.)

Difference b/w short and long run
Short run mai alag se fixed (machines,land) aur variable (labour,material) ko classify karte hai.
Long run mai saare factors of production hote hai.

Short run mai product ki demand bahut zaada hoti hai par supply dheere dheere badti hai.
Long run mai demand aur supply ek saath badti hai.
-----------------------------------------------------------------------------------------------------------------------
Now we all know what is variable factor and fixed factor. In another words we can say that

Variable factor refers to those factors which can be changed in short run. They vary directly with output

Fixed factor refers to those factors which cannot be changed in short run. They do not vary directly with output
------------------------------------------------------------------------------------------------------------------------

Concept of product
Main concept toh simple hai kitna volume goods ek firm banata hai ek specific time pe. ( example- winwat company ne 1 mahine mai 500 mobiles banaye)

Total products
It refers to total quantity of goods jo ek firm ne banaye at give period of time.

Average products
Average products refers to output per unit of variable input.( matlab output/variables hua 500 mobiles made by 10 labours. so average is 500/10 #50 mobiles.

Marginal products
Marginal products refers to addition to total products.(simple kitna additional total production bada
example 500 mobile pehle mahine bne phir ek labour ko bada dia. agle mahine 550 mobile bane
to marginal 550-500=50 mobiles ho gya.
-------------------------------------------------------------------------------------------------------------------------

law of variable proportion

Jab ham ek hi input ko badate hai (labour etc) baaki sabi ko constant rakhte hai. TP(total product) badega increasing rate se Phir badega decreasing rate se Last mai negative rate se decrease hoga.

 

 

 

 

isme marginal product pehle badega. phir ghatega aur phir last mai negative ho jayega

 

Reasons for LVP

1stage pe incerese islia hota hai bcoz increase in variable factor causes increase in production.

2stage pe increase hota hai pe becz variable factor aur fixed factor mai combination ni ban paata.

3stage pe decrease islia hota hai kyuki fixed factor kam ho jaata hai aur jadda variable factor khali waste hota hai.

----------------------------------------------------------------------------------------------------------------------

Law of diminishing return

it states thet when more and more unit of variable factor are employed with a fixed factor, the marginal products of variable factor must fall.

 

-----------------------------------------------------------------------------------------------------------------

Relation b/w TP and MP

TP increase hota hai increasing rate se to MP bhi increase hota hai.

TP increase hota hai decreasing rate se to MP decrease hota hai.

Last mai TP decrease hota hai  to MP negative ho jaata hai.

-------------------------------------------------------------------------------------------------------------------------

                                                                   THANK YOU

 

 

Quansi contracts

In certain case the law an obligation and allows an action to be brought on it as if it arose out of an agreement, though none was present in facts. such cases strictly speaking are not contracts
(jo contracts jo contracts ke rules bhi ni maante lekin law use manta hai vo hota hai quansi contracts)

ek banda kisi aur ki help krra goods ko laane mai #supply of necessaries

A person who is intrested in payment  of other he can

agar koi galat saman chale gya to usse vapis dena padega saman

 

Contingent Contracts

A contingent contract is a contract to do or not to do something if some event, collateral to such contracts does or does not happen ( matlab ye contract tab kaam ayega jab kuch event hone vaala ho jaise aag lagne pe hi insuraence vaale paise denge usee pehle nahi)
Wagering Contracts
in wagering contracts parties have intrest in bet. both paties make their promise and it is a void agreement. One person will win other will lose

 

 

Idemnity and gaurantee

A contract by which one party promises to save the other from loss caused by him by the conduct of the promisor himself is idemnity

As per sec 126 of indian contracts act 1872 a contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default
A borrows rs 2000 from B and C promises to B that if A does not repay the loan C will do

in gurentee they are 3 parties

 

Contracts of bailment and pledge

A bailment is the delivery of goods by one person to another for some purpose upon a contract that they shall when the purpose is accomplished be returned or otherwise disposed of according to the directions of the person delivering it

bailor is delivering the good

bailee whom goods are delivered

The bailment of goods as sequrity for payment of a debt or performance of a  promise is called a pledge. its also known as pawnee

I pledge that good will be deliver in good condition
also the good be safe in hands of me

 

Consequences of breach of a contracts

Breach of contract is a legal cause of end of action in which a binding agreement

Recission-when their is breach of a contract by a party, injured party may sue to treat the contract as rescined. #damages

ordinary damages are those which wise naturally in the usual course of things for the breach of the contracts

special damages result from the breach of contract under special circumtences they are indirect loss
-----------------------------------------------------------------------------------------------
Doctrine of quantum merit
*in case of a breach of contract an injured party can claim reasonable compantation
*some technical defects can cause void of agreement
*no use of  that service of the products

forexample- X forgets is mobile on Y house so Y has no right to use it for personal benefit

Performance and Discharge of contracts

Discharge of a contract means termination of contractual relationship between the parties(matlab contract cancel ho gya)
it leads to
Discharge of performance
Discharge by agreement or consent
Discharge by impossibility
Discharge by lapse of time
Discharge by operation of law

Performance of a contracts
contracts creates a legal obligation. this legal obligation continue till contract has been performed or otherwise dischanged Performance is a way to discharge. It lies in doing or causing to be done what the promisor has promised to do.

devolution of joint rights is when the person broke the contracts of not only one person but the whole public

When the promises of both the parties are to be performed simultaneously is said to be mutual and concurrent reciprocal

---------------------------------------------------------------------------------------------
The discharge by implied consents takes place by
Novation-when a new contracts is replaced by other
Alteration-When one or more of the term of the contract is alerted by the mutual consent of parties
Recission-recission takes place when all or some of the terms of the contracts is cancelled
Remission-Remmisson takes place when acceptance of a lesser fulfilment of the promise made.
Merger-it takes place when an inferior rights accuring to party under a contract merges into a superior rights accuring to the same party under a new contracts
------------------------------------------------------------------------------------------------------------
Actual performance- accept hone ke tootta hai
Attempted performance- mai accept hi nahi hota vo pehle I=hi khatam ho jaata hai

Free consent

                                                   Free Consent

Consent
when two or more persons agree upon something in the same sense they are said to have consented
it is free due to
coercion, fraud, undue, influence, misrepresentation, mistake click here for meaning
--------------------------------------------------------------------------------------------------------
Error of consensus means when their is no consent their is no contract which interfereres with consensus act idem is mistake

 

capacity to a contracts

                  Capacity to a contract

According to sec. 3 of Indian Majority Act 1875, a minor is one who has not completed his or her 18 years of age.

According to sec. 30 a minor cannot became a partner

A minor can be appointed as an agent but he can not be held personally liable for his acts. He can bind his principle by his acts

------------------------------------------------------------------------------------------------------------------
According to sec. 11 of indian contracts act every person competent to contracts who is of age of majority #18+ ,is of sound minded ,is not been disqualified from contracting by any law to which he is subjected.

------------------------------------------------------------------------------------------------
Minor is liable to pay out of his property for necessaries supplied to him or to anyone whom he is legally bound to support


so remember 3 things
minor cannot be in a contracts
of sound minded (idiots, drunken, lunatics etc) cannot do contracts
and one who is disqualified from any previous contracts

Consideration and Objects

            Consideration and Objects

Consideration
consideration means something in return. it is the price for which the promise of the other is bought also known as quid pro quo (matlab offer or acceptance ke baad vo product lene ke lia kuch dena money ya phir kuch aur)

a stranger cannot sue a contracts

no consideration cases
1- agreement made on account of natural love and affection

2-completed gifts

3- contribution to charity etc

Proposal and Accptance

Proposal-A proposal is an undertaking by the offer to be contractually bound in the event of a proper acceptance of the offer by the offeree.(isko yaad mt krna apne man se likh dena
hm kisi ko offer dere hai written mai ya bol ke #proposal)

Acceptance-A contract emerges from the acceptance of an offer. Acceptance the act of asenting by the offeree to an offer.(offer dia hua accept kar lia ho gya acceptance)

----------------------------------------------------------------------------------------------------------------------
Legal rules of proposal
1-term must be certain(jo daily life mai hote rehta hai )

2-An offer may be expressed or implied(either spoken or written

3-offer should create legal relationship between parties

4-offer may be general or specific (ek person se offer kiya ho general and pure public se kiya ho specific)

----------------------------------------------------------------------------------------------------------------------
Consent
Two or more persons are said to constant when they agree upon the same thing in the same sense

coercion- A will shoot B if he don't give his horse to A. B gives his horse to A because of fear

under influence-Doctor asks to submit a large sum of amount of fees to patient .the patient accepts to pay

fraud-A sell is mobile to B. A said the the mobile has 4 gb ram and B buys it. but in reality it have only 2 gb ram

misrepresentation- to reprensent the products in wrong way

koi question ho to comment mai daal dena.....
 

Nature, Essential and Importance of Contracts

                                          CONTRACTS

A contract is an agreement between two or more person which is enforceable by law
as per sec 2 h of indian contracts 1872

an agreement can be legal or illegal purpose but a contracts is made only for legal purpose

Void contracts- the contracts which cant be enforceable (accepted) by the law is a void contracts.
A sell his horse to B .after few days horse died. But B cannot claim for this case bcoz their contract does not says about horse life. so it is void


Voidable contracts- An agreement which is enforceable by law by any one of two parties is voidable contract.
A wants to kill B if he does not sell his horse for rs 1000. the claim can be voidable of B.

-----------------------------------------------------------------------------------------------------
Law is the body of principles recongnised and applied by the state in the administration of justice.

Commercial law include the law applicable to the ordinary transactions of merchants bankers and traders and denotes that branch of the law which relates of property and the relations of persons engaged in commerce.
 

Agency

                                                          AGENCY

According to sec 182 of indian contracts act 1872 An agent is a person employed to do any act for another or to represent another in dealings with a third persons. The person for whom such act is done or who is so represented is called the principle.
(ek agent ko tab hire karte hai jab kisi third party ke bande se dealing karni ho. agent hamari taraf se usse baat karega)


There are two types of agents

1-Sub agents- A sub agent is a person employed by the acting under the control of the original agents in the business. for example A appointed B to do some work. B appoints C to do some part of it , B is A sub agent.
isme har kaam mai agent hi fasega agar usne galat kiya toh. koi agent ka appoint kiya hue ka koi haath ni hota
the definition is given in Sec 191 in indian contracts act.

2-Substitued agents- a part of a business of agency intrusted a new person is a substitued agent.
(isme agent ko jo bhi kaam dia hota hai us kaam ka chota sa hissa agent kisi aur ko dede vo substitued agent kehlata hai. Agar koi bhi galti hui toh main agent fasega)
the definition is given under section 194 of the acts

--------------------------------------------------------------------------------------------------------------------------
An agency comes to end by these two ways
Termination by act
by mutual agreement between agent and principle

By operation of law
by expiry of the period of the agency or by completion of the business of agency

 

The sale of goods act, 1930 part 1 simple

*A contract of sale of goods is a contract where by the seller agrees to transfer the property in goods to the buyers for a price.

*In the agreement to sell, the property in goods is transferred to the buyer, when the agreement to sell becomes actual sale.

contract- here buyer is the true owner of the goods

agreement-here the seller is the true owner of the good

contract- loss is born by buyer

agreement-loss is borned by seller

contract- seller cannot resell the goods to a third party

agreement-the seller can sell the goods to a third party however he can be liable to compensate previous buyer

-------------------------------------------------------------------------------------------------------------------------
Condition- it is the essential purpose of contract, in the sale of good  acts 1930. the breach condition give the aggrieved party right to repudiate the contracts and also to claim damages
if A sells his horse to B and gives B a condition that the horse will run 20 kmph. But after a while a horse started running at 8 kmph. So be can return the horse to A .

Warranty-A warranty is only collateral to the main purpose of the contracts
if A sell his horse to B and gives B a warranty that the horse will run 20kmph. But after a while the horse started running at 8 kmph. Now a cannot to anything he only  can claim for it

------------------------------------------------------------------------------------------------------------------------
 

Partnership theory

                                              PARTNERSHIP



According to section 4 of partnership act defines Partnership is "a relationship between persons who agreed to share profits of a business carried on by all or any of them acting for all"

Kinds of partnership
1-particular partnership(section 8)-when partnership is formed for a particular period say for 5 years or for a specific venture.

2-partnership at will(section 7)- it is a partnership where no provision is made by contract between the parties

Essential characteristics of partnership

1-their must be relation between two or more numbers. As per the companies act 1956,
in a firm carrying on banking business it should not exceed 10 and in any other business 20.

2-Their must be agreement between partners. The agreement may be express or implied, written or oral etc

3-This agreement must be made with the object of doing some business. The word business has been used in the most elastic sense to include any trade, occupation or profession,etc

4-The object of partnership must be carry on business for profit sharing's between partners.

------------------------------------------------------------------------------------------------------------------

A partnership can be reconstituted(changed) during
admission of new partner
retirement of a partners
expulsion of a partners
insolvency of a partners
death of a partners
transfer of partner's interest to outsiders


Procedure for registration of a firm
the firm name
the place or principle place of business of the firm
the names of any other places where the firm carries on business
the date when each partner joined the firm
the names in full and permanent addresses of the partners
the duration of the firm
--------------------------------------------------------------------------------------------------------------------
Partners have rights
*to take part in the business
*to be consulted(express their opinion)
*to have access to the book of firm
*to share profit
*interest on capital
*use property of the firm etc

 

The negotiable instruments

                                   The Negotiable instruments

The law relating to the negotiable instrument is contained in the negotiable act, 1881.
its a promissory note, a bill of exchange, cheque payable either to order or to bearer

1-The holder of the instrument is presumed to be the owner of the property contained in it.
1-(jis bande nai vo instrument lia hai usse us property ka owner maana jaata hai)

2-they are freely transferable

3-The holder in due course gets the instrument free from all defects of title of any previous holder.
3-(naye holder ko vo instrument bilkul sahi halat mai milega agar usse pehle bhi koi uska owner tha to)
------------------------------------------------------------------------------------------------------------------------

Bill of exchange
A bill of exchange is an instrument in writing containing an unconditional order, signed by the market directing a certain person to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instruments.(matlab ek bande ne dursere bande ko ek bill dia ki vo payment is din puri karega)

Essential of bill of exchange
1-It must be in writing

2-It must contain an unconditional order to pay money only and not merely a request.
2-(us instrument mai bilkul saaf saaf ye likha hona chahiye ki tumhe paise dene ka order hai. ye nahi ki khali paise lene ki request kar re ho)

3-it must be signed by the drawer.

4-The parties must be certain
4-(dono parties mai pakka samojota hona chahiye)

------------------------------------------------------------------------------------------------------------------------

Promissory note
A promissory note is an instrument in writing containing an unconditional undertaking. Signed by the market to pay a certain sum of money to or to the order of a certain person or only to bearer of the instruments.(matlab ek banda promise karta hai ki vo puri payment Is din kar dunga. vo likh ke dega apna promissory note)

------------------------------------------------------------------------------------------------------------------
cheque is payment which is drawn in bank after a period of time
------------------------------------------------------------------------------------------------------------------

promissory note have 2 parties
bill of exchange have 3 parties

promissory note cannot be drawn in sets
bill of exchange can be drawn in sets

cheque always drawn in bank
bill of exchange can in drawn by a person or in bank

discharge modes
Sec 82a =The maker, acceptor or endorser is discharged from his liability if his name is cancelled by the holder.

Sec 82b=The maker, acceptor or endorser may be discharged by any methods other than cancellation of name.

Sec82c=If the instrument is payble to bearer, The payment in due course to the person discharges the parties liable on such instruments

Sec 83=When the holder of a B/E follows more then 48hrs of public holidays all previous parties are discharged
 

Indifference curve analysis

                                    Indifference curve analysis

An indifference curve is a curve which shows different combinations of two commodities which gild equal satisfaction to the consumer.

  combination               commodity x                  commodity y

            A                                   1                                      20
            B                                   2                                      15
            C                                   3                                      11
            D                                   4                                      8
            E                                   5                                       6
            F                                    6                                      5


As we can see in this figure that when we increase the consumption of x the y commodity automatically decreases

assumption
1-consumer's behaviour is rational and he prefers only those combinations which give the maximum satisfaction.
2-The satisfaction received from the combination will be put is a systematic order by the consumer.
3-If the consumer increases the quantity of the consumption of one products, then he is ready to renounce or decrease the quantity of the second product in the same order

Characteristics of indifference curve

1-it is convexed towards origin due to law of diminishing marginal utility
2-indifference curve is inclined towards right because if one unit of commodity  increases other will decrease
3-indifference curve never intersect each other
4-indifference curve can be circular if the consumption is unlimited

 

supply

                                            SUPPLY

 

By Supply we mean the quantity of commodity that a seller is prepared to sell at a given price at a given time.

 

Factor determining supply of the commodities

 

1-higher the price of the commodity the supply will be increases and lower price will decreases the supply

 

2-supply is also depend on related goods supply like if the supply of tea will increases so the supply of sugar will also increases

 

3-natural calamity also change the supply. if drought occur the supply of agricultural products will be decreased

 

4-if factor of production like land labour capital cost will increase the supply of the goods will decreases

 

5-if the technology is latest it can make products in cheap and very fast so the supply will increases

 

6-supply is also depend on means of transport. Supply will decrease if the transport facilities is not their

 

--------------------------------------------------------------------------------------------------------------------------

Law of supply

 

"it says as the price rise, other things remaining the same, the supply rises and as the price falls the supply decreases"

 

                    Price of sugar                            quantity supplied

                           3                                                  200

                           4.5                                               500

                           5.5                                               800

                           6.0                                               1000

 

 

Assumptions of the law

1-Income of buyers and sellers remains constant

2-Taste and preferences of buyers and sellers remain the constant

3-there is no change in the techniques of production

4-costs of all the factor of production remain same

 

Demand and law of Demand

                                        DEMAND

 

Demand is desire for the satisfaction of which a consumer has resources and he is willing to part with the resources

1-their should be a desire to have a commodity

2-there should be resources to buy the commodity

3-there should be willingness to spend the resources

4-the commodity desired should be available

 

--------------------------------------------------------------------------------------------------------

we all know what is demand, everyone have demands of products in their life

 

1-derived demand-when the demand of anything is derived from another demand for example

if the demand of leather shoes increases. the demand of workers of making leather shoes will automatically increase.

 

2-composite demand-when one product demand used for other uses also is composite demand. for example coal can be used for heating,cooking,railway engine .so demand of coal will be used for several uses.

 

3-joint demand-when 2 or more product are used for one satisfaction of demand is joint demand for example- if we have to make tea so 2 things we need tea and sugar so both we need to satisfy one demand

 

and direct demand is simple demand like demand of pen,mobile,lights etc

 

-------------------------------------------------------------------------------------------------------------------

 

Law of demand says if price will increases the demand will decreases

and if price of the products will decreases the demand will increases

 

P=1/Q       (where P is price of commodity and Q is demand of the commodity)    

 

Assumption

1-Consumers income remain the same.

2-The consumer's habits, tastes and preference do not change

3-the prices of the substitutes and complements remains the same

 

 

            Price of the commodity                         Demand (in Qnts.)

                         10                                                        120

                         20                                                        85

                         30                                                        60

                         40                                                        40

                         50                                                        30

                         60                                                        20

 

this shows increase in price makes decreases in demand. And the figure will be like that. So this is LAW OF DEMAND

 

this is known as demand curve

Limitation of law of demand

if the rumours starts that price of petrol will increase from next day. So the demand of petrol will increase today
 
income of the consumer also makes the change in demand

lack of consumer understanding also changes the demand

 

Consumer's Surplus

                Consumer Surplus

The excess of price which a man would be utility to pay rather than go without the thing,over that which he actually does pay is the economic measure of surplus satisfaction

The products which we pay less and get satisfaction more than the price. For example newspaper cost is 5 rs incase ,so we get so much news at price of only 5 rs

_------------------------------------------------------------------

Suppose a person purchases 6 mangoes and he pay 1 rs for each unit.

But we can see he can get utils of  6rs for first unit.

5rs for second unit

4rs for third unit

3rs for fourth unit

2rs for fifth unit

1rs for sixth unit

So as per different price case he is ready to pay rs 21 for all unit but he gets different utils.

But he pays only 6 rs for all

So surplus is 15 rs

Surplus is total utility -x (x is amount which we pay in real)

Assumption

•the marginal utility money remain same

•the supply and utility of one product does not effect the supply and utility of another products

•income ,taste and fashion are considered to be static

•utility is measurable

------------------------------------------------

Importance

1-importance in the comparison of price of the products in the ecomic life

2-importance of theory of monopoly value

3-no expensive international rates

4- cost benifit

Utility analysis of demand

                                       UTILITY

Utility is a mental feeling of a person who expects to derive satisfaction from consuming a particular goods and service. for example if you are thirsty so water will give you utility.

 

utility is measured in numerical terms known as utils

 

if a person gets 5 utils on consuming 1 ice-cream. Then he will get 10 utils for consuming it again

 

Marginal utility-- marginal utility is the addiction to total utility due to consumption of one more unit of the commodity

 

like 1st cake gives total 5 utils satisfaction. same cake eatan 2nd time give 11 utils satisfaction and 3rd time it gives only 15 utils satisfaction

so marginal utility was in 1st time it was 5 and in 2nd time 6 utils because it is the change in utils occur and in 3rd time it came 4 utils

 

Total utility-- Total utility is the amount of utility derived from the consumption of all the units at the disposal of the consumer.

 

like in that cake example total utility was 5,11,15 utils

 

  in this diagram TU is total utility and MU  is marginal utility

 

Law of diminishing marginal utility

 

It means the more we have of a thing, the less we want additional increment of it or the more we want not to have additional increments of it

 

for example- if a person is thirsty he needs water ,he drank 1st glass of water and then he drank 2nd glass now at third glass he will be not so much satisfy on it and in forth glass he will don't like it his satisfaction will be over

 

Assumption of ldmu

 

1-constant taste- every time the person consumes the unit he taste must be same of all units,different taste will affects the utils . for example If a person eats burger then he eat pizza there will be change in both utils

 

2-contant income-there should not be any change in the income of the consumer

 

3-time should remain unchanged--this law will apply only when the consumption is going on same time

 

---------------------------------------------------------------------------------------------------------------------------

 

now  at the diagram we can see tu is increasing and then from e point to f it is constant after f it started diminishing

 

and mu is dimsing at e point it is at 0 and then it came in - values

 

this is due to when we consume the unit again and again our satisfaction keeps decreasing

 

after a while we don't want to consume that products when tu started diminishing and mu became negative

 

tu increases mu diminishes

 

tu stop at a point and remain constant mu will be a 0

 

tu stated diminishing mu will be on negative