BASIC ECONOMIC TERMS

1.LAW OF DEMAND

Definition: Demand is the want or desire to possess a good or service with the necessary goods, services, or financial instruments necessary to make a legal transaction for those goods or service.

Example: -

 I went to a shop to buy a bag for me. I found there is discount on  the brand I want. I bought two different bags for me and my brother with the actual amount I have with which only I can buy only one bag. This is law of demand where price decrease demand increase.

2. SUPPLY

Supply is the producer’s willingness and ability to supply a good at different prices, where all other factor held constant.

Example: -

During summer once there was water problem in Hyderabad. I went along with my friend to water tank supplier where the original cost is 400. Because of excess supply and lack of water they demanded 1500. according to law of demand the price is also high.

3.CARDINAL UTILITY

The neo-classical economists, who believe that utility is measurable, and the customer can express his satisfaction in cardinal or quantitative numbers, such as 1,2,3, and so on.

Example: -

I went to a movie with my friend once. Where I was extremely satisfied and my friend was disappointed , so he started giving 1 rating to the movie because he is disappointed.

4.ELASTIC DEMAND

The degree to which demand or supply reacts to a change in price is called elasticity.

Example: -

Coffee is generally widely available at a level of quality that meets the needs of most buyers. The combination of a low price, relative to the buyer’s spending power, and the fact that the product is sold by many different suppliers in a competitive market, make the demand highly elastic.

5.INELASTIC DEMAND

Example: -

Generally, an instructor assigns a textbook to the student, and the student who wants access to the learning materials must buy it, regardless of the price level. Because the student can’t easily identify another textbook or resource that will ensure the same content and grade for the class, he has no substitutes and must buy the book at any price (or opt not to buy it at all).