Economic Problem and factors
Economic Problem There is a substantial difference between wants and needs. Human wants are countless, but the means are limited. As the term suggests, the problem in an economy may cause economic problem. So, what's the problem? The problem is scarcity, which means limitation of supply when compared to demand. And the economy faces doldrums. Economic problem is a problem of choice involving satisfaction of unlimited wants out of limited resources. I'll brief the three main reasons for existence of economic problems : 1. Scarcity of resources - Resources are limited in relation to the huge demand and an economy cannot produce all what people demand. To summarise, the basic reason for existence of economic problems. 2. Unlimited Human wants - Do you find this factor a tad bit relatable? Because our wants are relentless and never-ceasing. We always want something that differ in priorities and importance. 3. Alternate Uses - Resources can be put to various uses. One example - Petrol. If it is used for running vehicles, it is also used in running generators. Ergo, economy has to make choice between alternate uses.
Economics analysis of Business
This material will helps in preparing for the candidates appearing for the Competetive exams that includes UPSC,SSC,State service examinations and as well as the documentary materials for the Class 11 and 12 th students especially the topic deals with the Economics analysis of Business This document makes the readers easily understandable about the concepts and the reviews of NCERT Economics with a diagramatic explanation.
Hicksian and Slutskian Methods
The Hicksian Method and Slutskian Method The change in price of a product leads to the change in demand by the customers, as it is widely known that the price and quantity are inversely related. This is know as the price effect. And this price effect comprises of two effects namely income effect and substitution effect. Substitution Method Consider a two-commodity model for simplicity. When the price of one commodity falls, the consumer substitutes the cheaper commodity for the costlier commodity. This is known as substitution effect. Income method Suppose the consumer’s money income is constant. Again, let us consider a two-commodity model for simplicity. Assume that the price of one commodity falls. This results in an increase in the consumer’s real income, which raises his purchasing power. Due to an increase in the real income, the consumer is now able to purchase more quantity of commodities. This is known as income effect. Hence, according to our example, the decline in the price level leads to an increasing consumption. This occurs because of the price effect, which comprises income effect and substitution effect. To keep the real income constant, there are mainly two methods suggested in economic literature: 1) The Hicksian Method 2) The Slutskian method According to Hicksian method of eliminating income effect, we just reduce consumer’s money income (by way of taxation), so that the consumer remains on his original indifference curve. Slutsky attributes that the consumer’s money income should be reduced in such a way that he returns to his original equilibrium point E1 even after the price change. What we are doing here is that we make the consumer to purchase his original consumption bundle at the new price level.
Types of Markets
In market economies, there are a variety of different market systems that exist, depending on the industry and the companies within that industry. It is important for small business owners to understand what type of market system they are operating in when making pricing and production decisions, or when determining whether to enter or leave a particular industry.