Economics World

 MEANING OF ECONOMIC DEVELOPMENT...  The term ' economic development' extend the scope of economic theory in modern times. Every country wants to achieve higher rate of economic development. Various economists defined the term 'economic development' in different y. So it's very difficult to define the term ' economic development'. However, economic development is the process of improving standard of living, reducing poverty, inequality, unemployment, expanding employment opportunities and increasing per capita income over a long period of time.     According to classical economists, economic development means to increase in per capita GNP by the rate of 5% to 7% or more over a time. It means economic development refers only to the increase in National income over a long period of time. But according to some classical economists like Prof. Meier, economic development is a process whereby the real per capita income increases over a long period of time.      Mo

Market Equilibrium...   In common sense, equilibrium refers to the situation of rest or relaxation or free from tension. It also refers to the situation in which the two opposite forces are equal to each other. In economics, market equilibrium refers to the situation in which market demand for the commodity is equal to the market supply of the commodity. The point where market demand is equal to the market supply of the commodity is called equilibrium point which determines equilibrium price and quantity in the market. The process can be explained with the help of following schedule and diagram: The table shows that when the price is Rs. 6 per unit, Qty. Demand is equal to Qty. Supply. So the equilibrium price is Rs. 6 and equilibrium quantity is 30 units.  If we present the following schedule in the form of diagram, we will get a curve and we can easily understand the meaning of market equilibrium.  Demand curve (DD) and supply curve (SS) intersect at point Exactly, which is the equil

Law of Demand...  It is another important theory in micro-economics. It is als the basis of consumption, production, exchange and distribution of goods and services. It was als introduced and developed by the neoclassical economist Alfred Marshall in his book "Principle of Economics" published in 1890 AD. This law is based on the functional relationship between price and quantity supplied of a particular commodity.        According to this law, if other factors remaining the same, when price increases, quantity supplied of a particular commodity also increases and vice versa. In other words, quantity supplied of a commodity increases along with increase in price and vice versa, other factors remaining the same . It means there is direct relationship between price and quantity supplied of a particular commodity.  Assumptions...  The law of supply is based on several assumptions which may not be applicable in real life. They are as follows: 1. No change in price of related comm

  Difference between movement along the demand curve and Shift in demand curve....  The main difference between movement along the demand curve and Shift in demand curve are as given below: 1. When the commodity experience change in both the quantity demanded and price, causing the curve to move in specific direction, is known as movement along the demand curve. But when the price of a commodity remains constant but there is a change in quantity demanded due to some other factors, causing the curve to shift in a particular side, it is called Shift in demand curve.  2. Movement in demand curve occurs along the curve, whereas the shift in demand curve changes its position due to change in original demand relationship.  3. Price is the main determinant of movement along the demand curve whereas other factors except price are the determinant of shift in demand curve.  4. Movement along the demand curve indicates the change in quantity demanded whereas Shift in demand curve indicates the ch

 Movement along demand curve Movement along the demand curve is based on the principle of law of demand. According to this principle, demand increases when price decreases and vice versa versa vice versa versa ,other factors determining the same . Therefore, movement along the demand curve may be defined as a nature of Extension and contraction in demand due to change in price other characters remaining the same. In other words , the moment of the consumer up and down on the same demand curve due to change in price, other factors remaining the same is also defined as movement along the demand curve . It can be explained with the help of following figure: In the above figure initially, consumer is in equilibrium at point 'a' on the demand curve DD when price is OP and quantity is OQ. When price of the commodity increases from OP to OP1, the quantity demanded for the commodity by a consumer decreases from OQ to OQo and the consumer moves from point a to b, it is known as construc

Derivation of Individual Demand Curve...  Individual demand curve can be derived with the help of individual demand schedule. In case of individual consumer also, demand increases when price decreases and vice versa other factors remaining the same. It may be defined as tabular presentation of various units of price and quantity demanded for a commodity by a consumer during a certain period of time, other factors remaining the same. It is presented in the following schedule: Schedule of Individual demand..  In the above schedule, it is seen that a consumer demanded 1 kg of a commodity when price of the commodity is Rs. 10 per kg. When price decreases from Rs. 10 per kg to Rs. 8,Rs.6, Rs. 4 and Rs. 2 per kg, the quantity demanded for the commodity increases from 1 kg to 2 kg, 3 kg, 4 kg and 5 kg respectively. The table clearly shows the inverse relation between price and quantity demanded for a commodity. If we present the schedule in the form of diagram, we will get individual demand c

 Supply....  In common sense, supply is same as sale. Quantity sold is said to be quantity supplied. But in economics, quantity oa a particular commodity that would be offered for sale at all possible prices during a particular period of time is called supply. The term ' offered for sale' means ability to sale and willingness to sale. Both are most essential to be a supply.  Determinants of Supply...  The quantity supplied of a particular commodity either increases or decreases with the passes of time due to change in several factors which are called determinants of supply. Some common determinants which affect the quantity supplied of various commodities are as follows: 1. Price of goods and services : Price of the commodity is considered as main determinant of the quantity supplied in the market. Other things being equal, when price rises, supply also rises and vice versa.  2. Price of related commodities : In case of substitute goods, when the price of a commodity increases

 Causes of downward sloping of demand curve.... We know that there is inverse relation between price and quantity demanded for a particular commodity. Therefore, demand increases when price decreases and the demand curve will be downward sloping. There are several factors which establish inverse relation between price and demand. They are as follows: 1. Law of diminishing marginal utility : The law of demand is based on the law of diminishing marginal utility. Therefore, demand increases when price decreases and the demand curve will be downward sloping. 2. Income effect : When price of a particular commodity decreases, the real income or purchasing power of consumer increases. As a result, demand increases when price decreases and the demand curve will be downward sloping. 3. Substitute effect: When price of a commodity decreases, it will become relatively cheaper than its substitutes. As a result, demand increases when price decreases and the demand curve will be downward slopi