2. The concept of economy
was develop by adom
smith as a science of
wealth
But latter the concept of
weal fear and scarcity
and choice also develop
2
1
5. “the term economic system refers to a
distinctive set of social and institutional
arrangement with in which answer are
provided by determining how resource are
allocated” r g lipsey
“in a type of economic system the decisions
about resource allocation are made without
any central direction but instead as a result
of innumerable independent decisions taken
by individual producers and consumers such
a system is known as a market economy” r
g lipsey and c harbury
5
7. Decentralize decision taking
Freedom of enterprise
Profit motive
Consumers sovereignty
Price mechanism
Perfect competition
Laissez faire [free trade]
7
8. Freedom for consumers
Mobility of factors of production
Efficient allocation of resources
Perfect competition
Technological innovation
Better standard of living
Incentive to work
Flexibility and automatic operation
Rich verity of goods and services
Economic growth
8
13. Two goods are said to
be Substitute goods
when the increase of
price in one increase
the demand of other
E.g. tea and coffee
13
14. Two goods are said to
be complementary
goods when the
increase of price in one
decrease the demand
of other
E.g. pen and ink
14
15. Two goods are said
to be independent
goods if they don’t
have any relation
The change price of
one doesn’t affect
other
E.g. shoe and pen
15
16. It is a
willingness
to pay
Resources
aren’t
require
Time factor
doesn’t
affect
E.g. bagger
want car
16
17. “the demand for anything at a
given price is the amount of it
which will be bought per unit
time at that price”
ferdric benham
“the term demand is define as
the number of units of
particular goods and services
that consumers are willing to
purchase during a specific period
and under a given set of given
conditions” pappas and
beigham
“demand is the quantity that
will be purchase of particular
commodity at various prices at a
given time and place”
Milton h spencer
17
18. “demand refer to the quantities of a commodity
that the consumers are able and willing to buy at
each possible price during a given period of time
other things being equal” alferd marshal
“by demand we mean the various quantities of a
given commodity or services which consumers
would buy in one market in a given period of
time at various prices” bober
18
19. So we can
say that
the desire
with a
ability to
pay is
demand
19
21. “the demand curve for a commodity shows a relation
between its price and a quantity a household wishes
to purchase per period of time” r g lipsey
21
32. The change in
demand of one
good due to
change in price
of other good
is known as
cross demand
E.g. the rise in
price of tea
increase
demand of
coffee
32
33. The demand for
more than one
goods to fulfill
single purpose
is known as
joint demand
E.g. demand for
sugar milk
water and tea
to make hot tea
33
35. When price falls his
purchasing power
increase. It increase his
real income so he can
purchase more goods.
It is known as income
effect.
35
36. When price except
one good increase
than consumer
substitute more
towards that goods
than other. This
effect is known as
substitution effect.
36
37. F[p]=Q[d]
“other things being
equal, the higher the
price of a commodity, the
smaller is the quantity
demanded and lower the
price, the larger the
quantity demanded.”
37
Object Meaning
F[p] Factor of
production
Q[d] Quantity
demanded
40. No change in
income of
consumer
No change in
price of
related goods
No change in
taste and
fashion of
consumer
No change in
habit of
consumer
No
expectation of
future change
in price
No change in
size and
composition
of population
40
41. Judge by price
Geffen goods
Price expectation
Articles sold under two brand names
If shortage is feared
Out of fashion
Customs and tradition
Change in season
Necessaries of life
Change in income
41
48. Price of related goods
Consumer incomes
Consumer tastes and fashion
Technological progress
Change in size and composition of population
Change in distribution of income
Taxation policy
Change in real income
Expectation
48
49. ”in economics the
word supply always
means a schedule. A
schedule of possible
prices and of
amounts that would
be sold at each
price” Watson
and getz
“the amount of a
commodity that
firms are able and
willing to offer for
sale is called the
quantity supplied of
that commodity” r g
lipsey
“the supply of goods
is the quantity
offered for sale in a
given market at
given time at
various prices”
Thomas
49
51. Decrease in
number of firm
Increase in rate
of tax
Increase in
various cost
associate with
production
51
52. ”the supply
curve of a
commodity
shows the price
of the commodity
and the quantity
that the supplier
is willing to
supply at each
time period”
r g
lipsey
52
56. F[p]=Q[s]
“other things
remaining the same,
increase in price
increases the supply
and vice-versa.”
56
Object Meaning
F[p] Factor of
production
Q[s] Quantity
supplied
