INTRODUCTION TO ECONOMICS

INTRODUCTION TO ECONOMICS

FREE MARKET ECONOMY

Market economy refers to system where decision making is done by individual on issues about allocation on resources on the basis of price of the market of demand and supply.

ADVANTAGE OF FREE MARKET STOCKING

1. It discourages wastage of resources since the production takes place in response to demand.
2. There is confidentiality and flexibility of the market in changes in  demand and supply
3. Wide ranges of consumer’s   variety are encouraging through consumers competitions.

ABNORMAL DEMAND CURVE

This stipulates demand curve moves, from left to right. It shows that demand increase when prices and vice verses.

JOINT DEMAND

To satisfy a need, two or more good are demanded together in order from maximum satisfaction e.g. motor cars and petrol, sugar and milk.

COMPETITIVE DEMAND

These are substitute to one another, it need one in order to make maximum satisfactory of another e.g.  Tea and coffee are substitute to each other i.e. an increase in demand for tea will result in the decrease in demand for coffee ad vice verse.

COMPOSITE DEMAND

Some goods are use for all uses is known as composite e.g. cotton is used to make wool or steel in manufacture of machines and building.

 

OPPORTUNITY COST

–       The cost or alternative sacrifice that forgone the other to obtain that commodity. The producer has to combine the factors of production in which the commodity concern act as opportunity cost of another.

PLANNED ECONOMY

Also referred to as planted economy. Planned economy is a system where the crucial demands are determined by legislative of body of the state.

DISADVANTAGES OF PLANNED ECONOMY

–       There is wastage in production of resources because the consumers demand is judged in advance without the use of price mechanism.

–       The process of planned is expensive to the state

Demand curve is geometrical representation of the demand schedule. Demand schedule given above can be represented by a curve.

 

 

 

 

 

 

 

 

 

 

 

 

 

CAUSES OF ABNOMAL DEMAND CURVE

–       Exceptional of Future price due to increase in higher price consumers tend to buy more good and hold them.

–       Incase of given goods where goods are purchase in smaller quantities at lower price. Where people tend to buy goods of low price to satisfy  there need compare to other superior  quality foods.

–       Goods of ostentation where the wealthily are usually concerned about status. Good at higher price are worth  buying in effect of distinguishing  them from other consumers  exmples are jewellery, perfrumes, car

LAW  OF DEMAND

–       The law of demand changes inversely with the price it means the price fall then demand will increase and vice versa.

Demand schedule is a list of different price of a commodity and corresponding demand

Price                                       Demand

60                                            10

45                                            20

40                                            30

35                                            40

20                                            50

25                                            60