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Category: Economics

Determinants of price elasticity of demand

Determinants of price elasticity of demand

Price Elasticity of demand refers to the percentage change in quantity demanded to the percentage change in price and it measures the percentage of change in demand due to change in the price of the product which may be affected by various reasons like availability of substitutes, consumer habits, etc. Determinants of Price Elasticity of Demand: Price Range of the product: The price Range of the product affects the price elasticity of demand as with the change in the price…

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Expansion & Contraction of demand

Expansion & Contraction of demand

Demand refers to the number of goods & services that the consumers are willing to purchase and are able to afford at different prices at a given period of time. To constitute a demand, only desire to purchase any goods & services is not enough but desire should be accompanied by the means of purchase and the willingness to use that means of purchase to purchase the required product or service. Expansion of demand Expansion of demands means when there…

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Income Elasticity of Demand

Income Elasticity of Demand

Income Elasticity of Demand refers to change in the quantity demanded for certain goods with reference to change in the income of the person or consumer and all other factors being constant. It measures the relationship of change in quantity demanded to change in the income as people tend to spend more in case of an increase in real income. Explanation Income Elasticity of Demand measures how much there is a change in demand for certain goods with a change…

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Price Elasticity of demand

Price Elasticity of demand

Price elasticity of demand is the measure of the percentage change in price to the percentage change in quantity demanded. With price elasticity of demand, it can be measured as whether the demand for goods is elastic or inelastic. If the demand for goods is elastic there will be a change in the demand due to change in price whereas if the demand for the goods is inelastic there won’t be change in the demand due to change in price….

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Rationale of Law of Demand

Rationale of Law of Demand

The law of demand states that other things remaining constant if the price of a product declines then the demand for such product increases whereas if the price of a product rise then the demand for such product declines. Therefore, we can say that an inverse relationship exists between the price of the given commodity and the quantity demanded of such commodity, ceteris paribus.   Why does a demand curve slopes downward? Usually the demand curve is downward sloping. This implies…

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Methods of Calculating GDP

Methods of Calculating GDP

GDP is known as Gross Domestic Product. It is calculated to know the growth of the nation. GDP is nothing but realizable market value of all goods and services produced in a country during the period of time. It is generally calculated on annual basis but in some countries it is also calculated on quarterly basis. More GDP attracts more investment in the country and vice versa. GDP plays an important role in development and growth of country. There are…

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Law of Demand

Law of Demand

The law of demand states that other things remaining constant if the price of a product declines then the demand for such product increases whereas if the price of a product rise then the demand for such product declines. Therefore, we can say that an inverse relationship exists between the price of the given commodity and the quantity demanded of such commodity, ceteris paribus.    Explanation The Law of demand is one of the important laws studied in microeconomics. The law…

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Determinants of demand

Determinants of demand

Demand refers to the desire and ability to purchase any given commodity or service at different prices, at different prices of complementary or competing goods and at different levels of income. There are various factors including price of goods, price of related goods, income of consumer etc. that affect the quantity demanded of goods & services and these factors are known as determinants of demand. Determinants of demand: The determinants of demand are discussed below. 1.Price of the commodity:Ceteris paribus…

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What is Demand?

What is Demand?

Demand refers to the quantity of goods & services that the consumers are willing to purchase and are able to afford at the different prices at a given period of time. To constitute a demand, only desire to purchase any goods & services is not enough but desire should be accompanied by the means of purchase and the willingness to use that means of purchase to purchase the required product or service. Explanation with example: The Demand is the quantity…

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Gross Domestic Product

Gross Domestic Product

Gross Domestic Product represents the total market value or the total monetary value of the goods & services produced in the nation’s economy within a given time period (usually a period of one year). Calculation of GDP is the most widely used method to calculate the size of the economy of the nation and includes only the market value of initial production of goods & services and not the sale and resale of the goods produced. Explanation: GDP is used…

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Difference between Microeconomics and Macroeconomics

Difference between Microeconomics and Macroeconomics

Firstly, let’s discuss the basic meaning of microeconomics and macroeconomics. Microeconomics: Definition: Microeconomics is the study of small groups of society including the study of the decision making of the individuals such as consumers, firms, households etc. in allocating of resources. The approach of microeconomics is both practical as well as theoretical. It focuses on solving the three major problems of an economy i.e. what to produce, how to produce and for whom to produce. Explanation: The word micro in…

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Macroeconomics

Macroeconomics

Macroeconomics is the study of the performance and behavior of the larger groups in the economy as it involves study of overall national and international economy. It focuses on the study of problem of employment, GDP, investment, government fiscal & monetary policy, consumption, economic growth, level of inflation, recessions, depressions etc. Explanation: The word ‘Macro’ in the macroeconomics is derived from the Greek word ‘makros’ that means large. The study of macroeconomics focuses on overall economic phenomena, national income and…

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Microeconomics

Microeconomics

Microeconomics is the study of small groups of society including the study of the decision making of the individuals such as consumers, firms, households etc. in allocating of resources. The approach of microeconomics is both practical as well as theoretical. It focuses on solving the three major problems of an economy i.e., what to produce, how to produce and for whom to produce. Explanation: The word micro is derived from the Greek word ‘mikros’ which means small. It is the…

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Economics

Economics

Economics refers to the study of human behavior where an individual or the nation as a whole is required to make choices to employ limited resources, having alternative uses, into the production, distribution & consumption of goods and services to achieve the maximum output over a period of time. Explanation: With the publication of Adam Smith’s, ‘An Inquiry into the nature and causes of wealth of nations’ in the year 1776, the study of economics came into the picture. The…

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