Income elasticity of demand : It is the responsiveness of the quantity demanded for a good or service to the change in the income of the people demanding the good .As an economy grows and expands people will enjoy rising income
Example : Suppose the initial income of my part time job is 2000 and the demand of the wallet is increased to 20 units. when the income increases to 3000,the demand also increases to 40 units then.,
quantity demanded : 40-20 = 20 units
Change in income : 3000-2000 = 1000
income elasticity = hence an increase of Rs.1000 in income i.e., 1% in income leads to a raise of 2% in quantity demanded.
People face trade-offs : It is the first principle of economics. To get something we want for., we have to give up on other ..This is called trade offs. Making decisions requires trading off one item against other.
Example : If you want to buy cake to your friend on her birthday party.,you want to invest money to get the cake. if you want to gift cake you want to spend money to buy this is trade off.
Law of demand : Law of demand states that if the price of the good increases., the quantity demanded for the good decreases. It is the inverse relationship between the price and quantity demanded.
Example: A new restaurant has opened besides our college. There are only 7 tables in the restaurant but everyone wants to get a reservation., here the demand for reservations goes up.
Law of diminishing marginal utility : If a person goes on consuming more and more units of a commodity the less satisfaction he derives from the additional utility.
Example : Fond of chocolates., If i consumes 2 for the first time, 3 for the second time and so on..,the more i have the less satisfaction i get from the last unit of chocolate.
Law of marginal substitution : It is the amount of the good that a consumer is willing o give up for another good.,as long as the new good is equally satisfying .
Example : My mother gave me Rs:100 to get tomatoes and potatoes., but the price of each kg were 50 and 60 respectively., though i am having only 100 i distributed among them equally and brought both tomatoes and potatoes with the rupees 100 .
Example : Suppose the initial income of my part time job is 2000 and the demand of the wallet is increased to 20 units. when the income increases to 3000,the demand also increases to 40 units then.,
quantity demanded : 40-20 = 20 units
Change in income : 3000-2000 = 1000
income elasticity = hence an increase of Rs.1000 in income i.e., 1% in income leads to a raise of 2% in quantity demanded.
People face trade-offs : It is the first principle of economics. To get something we want for., we have to give up on other ..This is called trade offs. Making decisions requires trading off one item against other.
Example : If you want to buy cake to your friend on her birthday party.,you want to invest money to get the cake. if you want to gift cake you want to spend money to buy this is trade off.
Law of demand : Law of demand states that if the price of the good increases., the quantity demanded for the good decreases. It is the inverse relationship between the price and quantity demanded.
Example: A new restaurant has opened besides our college. There are only 7 tables in the restaurant but everyone wants to get a reservation., here the demand for reservations goes up.
Law of diminishing marginal utility : If a person goes on consuming more and more units of a commodity the less satisfaction he derives from the additional utility.
Example : Fond of chocolates., If i consumes 2 for the first time, 3 for the second time and so on..,the more i have the less satisfaction i get from the last unit of chocolate.
Law of marginal substitution : It is the amount of the good that a consumer is willing o give up for another good.,as long as the new good is equally satisfying .
Example : My mother gave me Rs:100 to get tomatoes and potatoes., but the price of each kg were 50 and 60 respectively., though i am having only 100 i distributed among them equally and brought both tomatoes and potatoes with the rupees 100 .
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