ALTERNATIVE

Combines

and organizes resources for the purpose of producing goods and/or services for sale. Internalizes transactions, reducing transactions costs. Primary goal is to maximize the wealth or value of the firm.

 SALES

MAXIMIZATION

Adequate rate of profit, through increased

volume of sales.

MANAGEMENT

UTILITY MAXIMIZATION

Coordinating Superiors and Subordinates to achieve the organizational goals.

SATISFYING

BEHAVIOUR

About the customers/consumers.

RICARD IAN THEORI ES

Focused on 3 aspects: Trade Advantage. (Theory of Trade) Wages & impact on Profits. (Theory of Wages & Profits) Productivity of Land. (Theory of Rent)

Trade Advantage Countries exports that item, whose production have

abundant resources with them, and imports those which have scarce availability; subjected to enjoy the advantage over them.

Wages & impacts on Profits (Theory of Profit) As real wages increases,

the real profits decreases, because revenue from the sales of goods is split among profits and wages.

 Productivity of Land while only one grade of land is being used for
cultivation, rent will not exist, but when multiple grades of land are being utilized, rent will be charged on the higher grades and will increase with the ascension of the grade. He stated that the poorest grade land in use has no (land) rent and so pays no land value tax.

DEMAND & SUPPLY

DEMAND
DEMAND = Desire for commodity + Purchasing power
Needs basic state of deprivation, that exists in every human life. Wants Need for a specific product. Demand wish for commodity+ money+ willingness to pay.

SUPPLY
SUPPLY = availability of product in the market

MARK ETS

CLASSIFICATION OF MARKETS

PRIMARY MARKET SECONDARY MARKET LOCAL MARKET REGIONAL MARKET NATIONAL MARKET GLOBAL MARKET COMMODITY MARKET BULLION MARKET MONEY MARKET CAPITAL MARKET

SHORT TERM MARKET MEDIUM TERM MARKET LONG TERM MARKET PERFECT MARKET IMPERFECT MARKET

MONOPOLY MARKET DUOPOLY MARKET OLIGOPOLY MARKET MONOPOLISTIC MARKET MONOPSONY MARKET DUOPSONY MARKET

CLASSIFICATION OF MARKETS

PERFECT MARKET: - where demand is equal to supply, commodities

are same, customer determines price, rare to exist.

IMPERFECT MARKET: - Dd is not equal to Ss, Commodities are

heterogeneous, seller determines price, commonly existing one.

MONOPOLY MARKET: - 1 seller, he determines price, no substitutes, enjoys huge profits.

DUOPOLY MARKET: - 2 sellers, price determined based on competition, profit sharing competition.

OLIGOPOLY MARKET: - Few sellers, Kinked Dd curve, needs heavy investments.

MONOPOLISTIC MARKET: - most commonly existing MONOPSONY MARKET: - 1 Buyer, he determines price, tenders/quotations are used.

DUOPSONY MARKET: - 2 Buyers, price determined by them.

TOTAL REVENUE,

TOTAL of an item X no: of units of COST TOTAL REVENUE = price

that item sold.

TR (Q) = P (Q) X Q

TOTAL COST = total economic cost of production and is made up of variable costs, which vary according to the quantity of a good produced and include inputs such as labor and raw materials, plus fixed costs, which are independent of the quantity of a good produced and include inputs (capital) that cannot be varied in the short term, such as buildings and machinery.

TOTAL COST

TOTAL COST
Marginal Revenue is equal to the change in total revenue over the change in quantity when the change in quantity is equal to one unit.

Break-even Point (BEP) is the point at

which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even.

PRODUCTION DECISIONS
INVENTORY DECISIONS

COST DECISIONS
MARKETING DECISIONS

INVESTMENT DECISIONS
PERSONNEL DECISIONS

Dd Fn is the algebraic expression of relationship between Demand for a commodity and its various determinants that affects this qty. Individual Demand Function = An Individuals Dd Fn refers to qty of goods demanded at various price levels by an individual. Market Demand Function = total Dd for goods or services of all the buyers taken together.

Various determinants of Dd Function are as follows: Dx = Qty demanded for Commodity X f = Functional Relations Px = Price of Commodity X

Pr = Price of Related Commodities, i.e. Substitutes &

Complementary M = Money income of consumer T = Taste and Preferences A = Advertisement Effects Te = Technology U = Unknown

Demand Schedule is the tabular representation of goods demanded and the price. Demand Curve is the graphical representation of relation between Demand and Price.
Price (Rs.) 5 4 3 2 Qty Demanded (Units) 10 15 20 25


own price

A demand curve must look like this, i.e., be negatively sloped.

demand quantity demanded

Individual Demand: Market Demand: Joint Demand: (Pen & Ink, SIM & Mobile) When two or more commodities are jointly needed to satisfy a single want, then the demand for such goods are said to be joint demand. Composite Demand: (Steel, Water, Cow) When a commodity is demanded for a number of uses, then the demand for that commodity is said to composite in nature. Competitive Demand: (Tea & Coffee) When two goods are close substitutes of one another, then the demand for such goods is said to be competitive in nature. Derived Demand: (Leather and Leather Shoes) When demand for a commodity gives rise to demand for another commodity, then it is said to be as a derived demand.

Negative Demand: (Vaccines, Dental Work) The market is in a state of negative demand if; a major part of the market dislikes the product and may even pay a price to avoid it. Negative Demand: (Vaccines, Dental Work) The market is in a state of negative demand if; a major part of the market dislikes the product and may even pay a price to avoid it.

When other things remaining the same, the amount demanded increases with a fall in price and diminishes with a rise in price.
Price (Rs.) 40 30 20 Qty Demanded (Units) 100 200 300

10

400

Price (in Rs.)

Y
40 30 20 10

D 10 20 30 40 0 0 0 0 Qty Demanded (in

Nos.)

A demand curve must look like this, i.e., be negatively sloped.

own price demand quantity demanded

Shifts in Demand Curve

Extension and Contraction of Demand occurs due to changes in price, other factors remaining constant When more of a commodity is purchased with a fall in price then it is known as extension of Demand and vice versa Refer to movement along same demand curve Increase and Decrease in Demand refers to changes in demand due to factors, other than price An increase in demand signifies that more will be purchased at a given price than before . Refer to movement from one demand curve to another

EXTENSION & CONTRACTION OF DEMAND

INCREASE & DECREASE IN DEMAND

Reasons for shifts (increase or decrease in Demand)

Changes in Income Changes in Taste, habits and Preferences Change in Fashions and Customs Change in Distribution of Wealth Change in Substitutes Change in demand for Complementary goods Advertisement and Publicity Persuasion Change in level of taxation

Supply Analysis
Supply during a given period of time means the quantities of goods which are offered for sale at particular prices Supply is what seller is able and willing to offer for sale Supply and Stock are related but distinct terms-Supply comes out of Stock Stock determines potential supply Stock is outcome of production

Determinants of Supply
Cost of factors of production State of Technology Factors outside Economic Sphere such as weather conditions, natural calamities, etc Tax and Subsidy

LAW OF SUPPLY
Other things remaining same , supply of a commodity rises with a rise in price and falls with a fall in price

Supply Schedule

SUPPLY CURVE

When market is in Equilibrium?

Equilibrium price of a commodity is
price at which quantity demanded of commodity equals quantity supplied. Equilibrium is condition which once achieved tends to persist in time.

Equilibrium of Supply and Demand

Price S D Excess Supply

Excess Demand

D Qty Demanded

Demand & Supply