Micro and Macro Economics

Topics Covered: Demand and Supply Types of goods Elasticity Monetary Stance of RBI Global Economy and its effect on India Macroeconomic Scenario

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Demand
Price and Quantity moves in opposite direction
Prices 4 8 12 16 20
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Quantity 28 24 20 16 12

Demand

price

quantity
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Determinants of Demands

Own Price Income of the consumer Price of other goods- 1. complements 2. substitutes Tastes and preferences Expectations of future prices Advertising Distribution of income

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Shift of the Demand Curve

Change in demand
Increase

in income Increase in price of substitute product

price

Change in Quantity demanded

B qty

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Supply
price

qty

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EQUILIBRIUM

supply

Eqbm Price

equilibrium Demand q Eqbm qty

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Types of Goods

Complimentary Goods
A

pair of goods consumed together. As the price of one goes up the demand for the other falls.

Car and Petrol

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Types of Goods Contd.

Substitute Goods
Alternatives

to each other. As the price of one goes up the demand for the other also goes up

Coke and Pepsi

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Types of Goods Contd.

Normal Goods
Goods

whose demand goes up when the consumers income increases.

Television
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Mobile Phones

Air Conditioners

Types of Goods Contd.

Inferior Goods
Goods

whose demand falls when the consumers income increases.

Kerosene Stove
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Tobacco Bidi

Analog Cameras

Types of Goods Contd.

Snob/Veblen Goods
Goods

whose demand falls when price falls

Mercedes

Opel Astra

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Elasticity (e)

Definition

The percentage change in one variable that arises due to a given percentage change in another variable.

By converting each of these changes into percentages, the elasticity measure does not depend on the units in which we measure the variables
% Change in variable 1

Elasticity =
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-------------------------------------------% Change in variable 2

Relation of Elasticity with Goods

Elasticity = 0 (Perfectly Inelastic) Elasticity < 1 (Relatively inelastic) Elasticity > 1 (Relatively elastic) Elasticity = 1 (Unitary elastic) Elasticity = (Perfectly elastic)

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Inflation

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Who will explain this stupid girl about the petrol prices and increase in expenditures???

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Nowadays he does not take me out. I think he is going out with some one else

Why the hell the Home loan is so expensive

Even my education loan too..

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Dont give me the damn about inflation. How can I manage day to day expenses then???

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Interest Rates---A Major Factor

Repo Rate 8% Reverse Repo Rate 7% CRR(Cash Reserve Ratio) 4.75%

SLR(Statutory Liquidity Ratio) 23%

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Ministry of Finance

Cut down multiple taxes on softwares made in India Why not for
us???

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Rs 7.5/- hike???????????/

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RBI increases ECR limit

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SLR24% ----------- 23%

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Common ManWhat can I DO???

I can only wait and watch the game

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Nishad Banodkar nishadbanodkar@gmail.com http://economicswithnishad.blogspot. in

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