Economics

Law of Equi- Marginal Utility

Law of Equi- Marginal Utility (Consumer Equilibrium for more than one commodity.) A consumer spends his income on many goods & services. How he should distribute his total income among these goods and services, so that he may be in equilibrium. (He attains maximum possible level of utility). Let the prices of two goods A & B be PA & ...

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Law of Diminishing Marginal Utility

When average utility attains maximum value, it is equal to marginal utility. Law of Diminishing Marginal Utility It is a general human behavior that as one gets more and more units of the same commodity, the utility from the successive units (marginal utility) goes on diminishing. If the consumer continues with the consumption he will develop a dislike for the ...

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Cardinal Utility Approach

Cardinal Utility Approach Utility is a property common to all commodities and services desired by a person. It has no physical or material existence and so it is not inherent in a commodity. As long as a commodity has some use i.e. a capacity to satisfy consumer want, it has utility. Thus utility can be defined as the want satisfying ...

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RISK, RETURN & PROFITS

RISK, RETURN & PROFITS Risk – Return trade off function or Indifference curve R indicates that the manager or investor is indifferent among 7.5% rate of return with Risk = 0; 10% return on an investment with Risk = 3.5 (Pt.B), 14% return on an investment with Risk = 6 (Point C) and 18% Return on an investment with Risk ...

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Time Value of Money

Time Value of Money One of the fundamental ideas in economics is that a Rupee tomorrow is worth less than a Rupee today. This is because of two reasons. (i) The future is uncertain (ii) The interest rate – inflation Todays Rs.100= 00 can be invested at 8% interest so that one year after today Rs100 will become Rs.108= 00. ...

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Opportunity Cost

Opportunity Cost is the income foregone which a businessman could expect from the second best alternative use of his resources. For example if an entrepreneur uses his capital in his own business he foregoes interest which he might earn by purchasing debentures of other companies or by depositing his money with joint stock companies for a period. Further more if ...

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Scope of Business Economics

Business Economics is useful in decision making by business firms regarding the least cost input mix, product mix, production technique, level of output, price for the product, investment decisions, amount of advertising out lay etc. It involves, tools, techniques, principles and theories by business firms for decision making and forward planning by establishing plans for the future. “Business Economics consists ...

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Contribution and Application of Business Economics to Business

Contribution and Application of Business Economics to Business Business Economics is useful in decision making by business firms regarding the least cost input mix, product mix, production technique, level of output, price for the product, investment decisions, amount of advertising out lay etc. It involves, tools, techniques, principles and theories by business firms for decision making and forward planning by ...

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Importance of Macro Economics

Importance of Macro Economics: 1. Formulation & Execution of Economic Policies:- Economic polices for the removal of the poverty, the unemployment and the price instability are based upon aggregate requirements. 2. Functioning of the Economy:- Macroeconomics gives us an idea of how a complex economic system functions 3. Study the Economic Development 4. Study of welfare 5. Theory of Inflation ...

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Micro V/s Macro Economics

Micro V/s Macro Economics Micro is derived from the Greek word “micros” which means small. Thus micro economics is the theory of small. It is the microscopic study of the economy. The term ‘macro’ is derived from the Greek word “macros” which means large. Macro economics also called “Income Theory” is concerned with the analysis of the economy as a ...

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