Current News
Implication of this news
Take–away of today’s lecture
Important Concepts in Economics
Is there any difference between
need, want and demand?
Need
• Needs are the essential
things to fulfill the states of
deprivation for our survival.
• Lack
of
subsistence.
means
of
Want
• Wants are directed by our
surrounding
towards
reaching certain needs.
• Having a strong desire for
something
After knowing the needs and wants,
another most important thing that a
marketer must know is DEMANDS.
Let’s study about it in the following
topic.
Demand
§ Demand: effective desire
§ Demand is that desire which
backed by willingness and
ability to buy a particular
commodity.
§ Things necessary for demand:
§ Time
§ Price of the commodity
§ Amount (or quantity) of the commodity consumers
are willing to purchase at the price
Polling question
Microeconomics is not concerned with the behavior
of:
a. Aggregate demand.
b. Consumers.
c. Industries.
d. Firms.
Why are needs and wants important
to a business?
• Knowing and understanding customer needs is at
the centre of every successful business, whether it
sells directly to individuals or other businesses.
Once you have this knowledge, you can use it to
persuade potential and existing customers that
buying from you is in their best interests.
• The fact about customer needs and wants is that
often customers are unaware of what they need.
They focus on what they want because of
emotional and or social reasons and companies that
give them what they want are better equipped to
build profitable and sustainable relationships with
customers.
How does knowledge of
need/demand helpful to a
businessman?
Demand Function
Interdependence between demand
for a product and its determinants
can be shown in a mathematical
functional form
§ Dx = f(Px, Y, Py, T, A, N)
§ Independent variables: Px, Y, Py, T, A, N
§ Dependent variable: Dx
§ Px: Price of x
§ Y: Income of consumer
§ Py: Price of other commodity
§ T: Taste and preference of consumer
§ A: Advertisement
§ N: Macro variable like inflation, population growth, economic
growth
§ A special case of demand function which
shows relation between price and demand of
the commodity
Dx = f(Px)
§ Other things remaining constant, when the
price of a commodity rises, the demand for
that commodity falls or when the price of a
commodity falls, the demand for that
commodity rises.
Polling question
When the decrease in the price of one good causes
the demand for another good to decrease, the goods
are:
a. Normal
b. Inferior
c. Substitutes
d. Complements
Economic Terms & Concepts
• Economics is the study of how choices are made
regarding the use of scarce resources in the
production, consumption and distribution of goods
and services.
• Scarcity can be defined as condition in which
resources are not available to satisfy all the needs
and wants of a specified group of people.
• Opportunity cost refers to the amount or subjective
value which must be sacrificed in choosing one
activity over the next best alternative.
Therefore, economics is a “science which
studies human behaviour as a relationship between
ends and scarce means which have alternative
uses.”
Kinds of Economic Decisions
The fundamental problems faced by an economy are:
1. What to Produce?
This relates to the type and range of goods to be
produced
2. How to Produce?
This relates to the means of production (Labour or
capital)
3. For whom to Produce?
This relates with the problem of distribution of
the product among various economic agents
4. Are Resources used Economically?
5. Are Resources Fully Employed?
6. Is the Economy Growing?
The
first
four
problems
are
related
to
microeconomics whereas 5th and 6th problem is
related with macroeconomics.