Principles Of Economics Revision Notes PDF

Tuesday 15th October, 2024 Principles of Economics Revisions Notes TYPES OF GOODS Normal Goods are goods for which de...

Tuesday 15th October, 2024 Principles of Economics Revisions Notes TYPES OF GOODS Normal Goods are goods for which demand increases as consumer income rises. Examples: Clothes, electronics, dining out. Inferior Goods are goods for which demand decreases as consumer income rises. Examples: Generic brands, and public transportation. Luxury Goods are goods for which demand increases more than proportionally as income rises. Examples: Designer clothing, high-end cars, luxury vacations. Necessity Goods are goods that are essential and for which demand does not change significantly with income changes. Examples: Basic food items, water, and housing. Substitute Goods are goods that can be used in place of each other. Examples: Butter and margarine, tea and coffee. Complementary Goods are goods that are often used together. Examples: Printers and ink cartridges, cars and gasoline. Public Goods are goods that are non-excludable and non-rivalrous, meaning anyone can use them without reducing availability to others. Examples: National defense, public parks, and street lighting. Private Goods are goods that are both excludable and rivalrous, meaning consumption by one person prevents others from consuming it. Examples: Food, clothing, cars. Types of Goods: Different classifications of goods such as normal goods, inferior goods, luxury goods, necessity goods, substitute goods, complementary goods, public goods, private goods, common goods, club goods, durable goods, and non-durable goods. Equilibrium Price and Quantity: Definition: The point at which the supply of a good matches demand.  Explanation: The equilibrium price is where the supply and demand curves intersect. At this point, the quantity of goods supplied equals the quantity of goods demanded. Differences Between Change in Quantity Demanded and Change in Demand: Change in Quantity Demanded: Movement along the demand curve due to a change in the price of the good. Change in Demand: A shift of the demand curve due to factors other than the price of the good, such as consumer preferences, income, or prices of related goods. Elasticity - Formula and Calculation of Elasticity: Price Elasticity of Demand (PED): PED=% change in quantity demanded% change in price\text{PED} = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}PED=% change in price% change in quantity demanded​ Other types of elasticity include income elasticity of demand and cross-price elasticity of demand. Types of Elasticity: Price Elasticity of Demand: Measures how much the quantity demanded responds to a change in price. Income Elasticity of Demand: Measures how much the quantity demanded responds to a change in consumer income. Cross-Price Elasticity of Demand: Measures how much the quantity demanded of one good responds to a change in the price of another good. Concept of Scarcity: Definition: The fundamental economic problem of having limited resources to meet unlimited wants and needs. Explanation: Scarcity forces individuals and societies to make choices about how to allocate resources efficiently. Definition of Microeconomics and Economics: Economics: The study of how individuals, businesses, and governments make choices when faced with limited resources. Microeconomics: A branch of economics that focuses on the behavior and decision-making of individual units, such as households and firms. Market Demand: Definition: The total quantity of a good or service that all consumers in a market are willing and able to purchase at different prices. Explanation: Market demand is derived by summing the individual demands of all consumers in the market.