Documente Academic
Documente Profesional
Documente Cultură
ECONOMICS
DR. Itty Benjamin
WHAT IS ECONOMICS
Economics is the study of those activities
of human beings, which are concerned,
with the satisfaction of unlimited wants
by using the limited resources.
Economics was made compulsory for
engineers in the first decade of 20 th
century.
Institute
of
Mechanical
Engineers (UK) found that 90% of the
management decisions required some
managerial responsibility and most of
them were basic in nature. Hence,
managerial economics was introduced in
engineering and management subjects.
Managerial Insight
Demand Elasticity
Demand Forecasting
Production Function and Laws
Cost Analysis
Pricing and Output Determination in different market structures such as perfect competition,
monopoly, oligopoly and monopolistic competition
Effective Demand
A buyers desire for a product in the market backed by
the ability and willing to pay for its price.
Determinants of Demand
Factors Influencing Individual Demand
Price
Income
Tastes, habits and preferences
People with different tastes and habits have different preferences for
different goods
Relative prices of other goods substitute and complementary
products
Consumers expectation
Advertisement effect
Demand Function
Mathematical of expression of functional relationship between determinants (such
as price, income, etc., determining variables) and the amount of demand of a
given product.
In composing the demand function for a product, therefore, one should identify
and enlist the most important factors (key variables) which affect its demand. To
suggest a few, such as:
The own price of the product itself (P)
The price of the substitute and complementary goods (Ps or Pc)
The level of disposable income (Yd) with the buyers (i.e., income left after
direct taxes)
Change in the buyers taste and preferences (T)
The advertisement effect measured through the level of advertising
expenditure (A)
Changes in population number or the number of the buyers (N).
Using the symbolic notations, we may express the demand function, as follows:
Dx = f (Px, Ps, Pc, Yd, T, A, N, u)
Demand Schedule
A tabular statement of price/quantity relationship is called
the demand schedule.
Individual Demand Schedule
Demand Curve
Exceptional Cases
Giffen goods
Articles of snob appeal
Speculation
Consumers psychological bias or Iillusion
Quantity Demanded
Changes in income
Changes in taste, habits and preference
Change in fashions and customs
Change in the distribution of wealth
Change in substitutes
Change in demand of position complementary goods
Change in population
Advertisement and publicity persuasion
Change in the level of taxation
Expectation of future changes in prices
Short-run and
Long-run Demand
Bandwagon Effects
Demonstration effect of consumption by the
others lead to the bandwagon effects of change in
demand for a product in the market. Advertising
and fashion play a significant role in this regard.
Bandwagon
Effect: The
Demand Curve
Shifts to the Right
Veblen Effect
Snob appeal of luxury goods leads to the Veblen effect
of demand through conspicuous consumption.