ENGINEERING ECONOMICS

& ACCOUNTANCY
UNIT-1

Dr.N.Aruna Kumari,
Assistant Professor in Management Studies
Department of Humanities & Sciences, VNR VJIET
UNIT-1: INTRODUCTION TO ECONOMICS AND MANAGERIAL ECONOMICS

Introduction to Economics: Definition, Nature, Scope and Types of Economics. Concepts of

Macro-economics: Gross Domestic Product(GDP), Gross National Product(GNP), National
Income(NI), Rate of Inflation.
Managerial Economics: Definition, Nature, Scope & Significance. Elements of Managerial
Economics: Demand Analysis, Law of Demand, Elasticity of Demand, Demand Forecasting.

1. INTRODUCTION TO ECONOMICS :
Economics affects everyday life and everyone’s lives. Everyone of us is having wants
and desires. When one want is satisfied then another want will come up. It is a continuous
process and human wants are unlimited whereas the resources that need to satisfy wants
are limited and they can be used for alternative purposes. Therefore, question of choice
arises while using the resources. It means, we are living in world of limited resources.
As resources can be put to alternative uses, we will have to take decisions as to which
specific want should be satisfied with particular means/way. Also we have to decide which
wants are to be satisfied and which of them are to be differed. In addition, in ordered to
satisfy increasing wants, efforts have to be made to increase the resources. But what helps
us in increasing resources in optimum utilization of available resources and in making
appropriate decisions pertaining to the means by which wants are to be satisfied ? The
answer is ‘Economics’ because:
✓ Economics is the study of scarcity, the study of how people use resources and
respond to the incentives or study of decision making.
✓ Economics is the study of how society uses its limited resources. It helps us in
deciding how to use these limited resources to satisfy our never-ending list of wants
and needs.
✓ Economics is concerned with satisfaction of human wants. It deals with production,
distribution and consumption of goods and services.
Economics touches everyone in the society, whether he is an employee, businessman, a
doctor, an advocate, a tailor, labour, a banker or a house holder. After attainment of
adulthood, everyone has his/her own family and required to make arrangement for food,
shelter, cloths and other necessaries of life for the members of family. We have to activate
ourselves to earn something, so that we may be able to meet the expenses. Our activities to
generate income are called as Economic Activity.
Definitions of Economics :
According to American Economic Association, “Economics is the study of scarcity, the study
of how people use resources and respond to incentives or the study of decision making.”
Most simple and concise definition is “Economics is the study of how society uses its limited
resources” or economics is a social science that deals with the production, distribution and
consumption of goods & services. This focuses mainly on four factors of production, which
are land, labour, capital and enterprise.
According to Professor Samuelson, “Economics is the study of how men and society choose,
with or without the use of money to employ scarce productive resources, which could have
alternative uses, to produce various commodities over time and distribute them for
consumption now and in future among various people and groups of society.”
In conclusion, “Economics is the subject which studies the behaviour of man and the society
with regard to use of scarce resources for achieving maximum possible satisfaction.”
Nature of Economics:
The important feature of economics as per the above-mentioned definition are as follows:
1. Economics is a social science, but it is not an exact science as it deals with human
behaviours and behaviour of the society as a whole.
2. Economics is the study of how society manages its scarce resources.
3. Problem of choice making arises due to unlimited wants and scarce means, we have
to decide which wants are to be satisfied and which are to be differed.
4. It explains how to utilize the available resources judiciously and how to increase the
resources, so that increasing wants can be satisfied.
5. It suggests way and means to solve the economic problems such as unemployment,
production, inflation, etc.
6. It explains how economic growth rate can be increased, how the resources of the
economy should be distributed among various individuals and groups, etc.
Scope of Economics:
Economics is concerned with the satisfaction of human wants. It is related to production,
consumption and distribution of resources among individuals and groups. The scope of
economics is so wide in dealing with factors of production such as land, labour, capital and
entrepreneurial abilities. Economics deals with the following :
1. National Income/GDP/GNP
2. Per Capita Income
3. Employment
4. Unemployment
5. Savings
6. Interest
7. Capital formation
8. Investment
9. Demand / Consumption
10. Production / Supply
11. Costs and their Analysis
12. Prices and Pricing
13. Inflation
14. Taxes
15. Fiscal Policies
16. Exports and Imports
17. Cost and Standard of Living
18. Foreign Exchange
19. Boom
20. Trade Cycle
21. Transportation
22. Banking & Financing
23. Profit Measurement and Management
24. Industrial Policies
25. Monetary Policies
26. Wages,
27. Rents,
28. Poverty
29. Economic Growth of Country
30. Etc.
 Types of Economics :

Classification-1

Micro- Macro-
economics economics

The subject matter of economics has been divided into two types as under:
(1) Micro Economics : It deals with analysis of small and individual units of the economy
such as individual consumer, individual firm and small aggregate or groups of
individual units such as various industries and markets . Micro-economics is the study
of how individual households and firms make decisions and how they interact with
one another in markets. The whole content of Micro-economics theory is presented
in the following chart :

Micro Economy Theory

Product Pricing Factors Pricing Theory of

Product Pricing Economic Welfare

Demand Theory of
Production Cost

Wages Rent Rent Rent

 (2) Macro Economics : It deals with aggregates of all the quantities of units of the
economy. But it does not deal with individual units of the economy. National Income,
National output, inflation, etc. are the subject matters of macroeconomics. Various
aspects of Macroeconomic theory are shown in the following chart:

Macro Economy Theory

Theory of Income Theory of general Theory of Macro Theory of

and Employment Price level and Economic Distribution
Inflation Growth

Theory of
Theory of
Consumption
Investment
Function

Theory of Inflation /
Business Cycles

Classification-2

Positive Normative
Economics Economics

Positive Economics : It deals with explaining what it is ? That is , it describes theories and
laws to explain observed economic phenomena. In the positive macro economics, we are
broadly concerned with how the level of National Income, Level of employment, Aggregate
consumption and investment, general price levels in the country, etc. are determined. But
what should be the prices, what should be the saving rate, what should be the allocation of
resources and what should be the distribution of income and wealth are not discussed and
explained in this economics.
Normative / Prescriptive Economics : Normative economics is concerned with describing
what should be the thing ? It is, therefore, also called as prescriptive economics. What price
for a commodity/service should be fixed ? What wage rate should be paid ? How income
should be distributed ? How to make optimum utilization of resources ? How to achieve
economic growth? etc. fall with in the preview of Normative economics. Normative
economics involves value judgements or what are simply known as values.

National Income
National Income is the money value of all final goods and services produced in a country
during a period of one year. National Income is the most important determinant of countries
economics status. The level of national income determines the level of aggregate demand
for goods and services.
“ It is the money value of all final goods and services produced in a country during a period
of one year in closed economy ". Ex: Brazil, North Korea. Closed economy is an economy
which has no economic transactions with the rest of the world.

But national income also includes the result of its transactions with the rest of the world in
open economy. Open economy is an economy which has economic transaction with the
other economics in the world.
NI = Value of the goods and services (which can be valued at market price)+ Exports over
imports
= Rent + Wages + Interest + Profit (Factor income Method).
In India NI calculation depends on 14 Broad sectors :
(1) Agriculture and allied activities
(2) Forestry and logging
(3) Fishing
(4) Mining
(5) Registered manufacturing
(6) Unregistered manufacturing
(7) Construction
(8) Gas, electricity and water
(9) Banking and Insurance
 (10) Transport, communication and storage
(11) Real estate, ownership of dwellings and business services
(12) Trade, hotels and restaurants
(13) Public administration and defence
(14) Other services
National Income is the reflection of:
(1) Distribution of Resources over the earth
(2) Efficiency in resources utilization
(3) Stability of the Government
(4) Functioning of institution of the nation
(5) Skill set of people
(6) Regional Imbalances
(7) Internal Development
Increased trend of National Income last six to seven decades :
Period National in Crores
1950-51 10,360
1960-61 17,879
1970-71 47,354
1980-81 1,49,987
1990-91 5,78,667
2000-01 21,54,860
2010-11 77,02,308
2011-19 1,64,38,895
Increase in NI denotes that nation is advancing in the economic and technological arena.

GNP = Value of all final goods and services produced during a specific period usually one
year + Income earned abroad by nations – Income earned locally by the foreigners. It is
identical to the concept of GNI. Thus GNP = GNI (Gross National Income). GNI is estimated
on the basis of money income flows (i.e. wages, profits, rent interest, etc.)
GDP = Market value of all final goods and services produced within the domestic economy
during specified period usually one year in India by Indian nations + Income earned locally by
foreigners. GDP is similar to GNP with significant procedural difference.
NNP = GNP – Depreciation
Depreciation is cost of worn out capital used in the process of production. NNP = NI
NDP = NNP – Net income from abroad

Institute of National importance is one that plays a crucial role in developing skilled people
within the state or region. These institutions provide high quality education mostly
supported by Government.
The Difficulties in measuring National Income :
1. Prevalence of Non-Monetized Transactions : Agriculture in which a major part output is
consumed at the farm level itself. The National Income statistician, therefore , has to face
the problem of finding a suitable measure for this part of output.
2. Illiteracy : The majority of people in India are illiterate and they do not keep any accounts
about the production and sales by this products. Under the circumstances the estimate of
production and earned incomes are simply guess work.
3. Occupational specialization lacking : Besides the crop, farmers are also engaged in
supplementary operations like dairy, poultry, cloth making, etc. But income from such
productive activities is not included in the NI estimation.
4. Lack of availability of adequate statistical data : Adequate and correct production and
cost data are not available in the country. Data on consumption and investment
expenditures of the rural and urban population are not available. Moreover, there is no
mechanism for the collection of data in country.
5. Calculation of Depreciation : There are no accepted standard rates of depreciation
applicable to the various categories of machines. Unless from Gross National Income correct
deductions are made for depreciation, the estimate of net National Income found to go
wrong.
6. Difficulties of avoiding double counting system : For example, the value of the output of
sugar & sugarcane are counted separately. The value of sugarcane utilised in the
manufacturing of sugar will have been counted twice, which is not proper.
7. Difficulty of Expended Method : The application of expenditure method is difficult task
because it is difficult to estimate all personal as well as investment expenditures.
8. Exclusion of Real transactions : The items which are purchased and sold through the
market are included and all direct sales of various goods and services are excluded.
9. Value of Leisure : The satisfaction we got from recreational activities and other uses of
our leisure time are also not included.
10. Cost of environmental damage : The cost of environmental damage are not deducted
from the market value of final products when NI is calculated.
Other minor difficulties :
• Valuation of Government services
• Imputed Income
• Self consumption
• The underground economy.

Inflation

Inflation refers to a situation continuously rising prices of commodities and factors of production. It is a
significant and sustained increase in the general price levels. It does not refer to changes in relative
prices of commodities, but to a rise in the general price level.

Partial Inflation :
According to some economists, any continuous rise in price level must not be taken as inflation.
Whenever price levels increases, the producers reap bigger profits and necessarily tend to produce
more. As a result the idle resources are put into use, unemployed workers get jobs, unused land and
capital goods are passed into service. As a result of this, the volume of production also increases. So
long as this happens, there is only ‘partial inflation’. Thus, partial inflation is rise in the price level
accompanied by increase in the volume of production of goods and services.

True Inflation :
A time comes when all the factors become fully employed. In this connection of full employment no
further increase in production can be envisaged. On the other hand, as a result of competition among
the producers the factor prices rent, wages, interest and profit, tend to rise. Since factor prices are
also factors incomes – incomes of suppliers of the factors of production, people have large incomes
than before. Larger incomes mean more expenditures and necessarily more pressure of
purchasing power upon goods and services. Production cannot increased further as all factors of
production are fully utilised. It is the situation which has been called a “True Inflation” by modern
economics .Thus , true inflation implies a situation of continuously rising price level without any
possibility of corresponding increase in production.
Important note on Inflation :
During inflation all prices are not necessarily rising. Even during period of rapid inflation, some prices
may be falling while others may be relatively constant. For example: India experienced high rate of
inflation in 1970s and 1980s. But there was not much change in electricity tariff and bus fare. At the
same time, the prices of certain products such as pocket calculators, personal computers, video
recorders and digital watches actually declined.
Types of Inflation :
For the sake of analysis , inflation is divided into different categories. The most important types of
inflation are the following :
Wage induced inflation : Due to trade union pressures money wages tend to rise whenever prices
rise. An increase in money wages increases cost of production without increasing production.
This, in turn, causes prices to rise still further. This is known as Wage-induced inflation.
Deficit induced inflation : It occurs whenever Governments unable to finance their current
expenditure by taxation are forced to print paper currency .Open inflation: Open inflation is said
to occur when the Government makes no attempt to control it.
Suppressed inflation : It refers to a situation where demand exceeds supply, but the effect o prices
is minimised by the use of such devices as price controls and rationing. It may be noted that price
controls do not deal with the causes of inflation but merely seek to suppress symptoms. When prices
are controlled by certain administrative measures such as fixation of price-ceilings, rationing or
otherwise, inflation is said to have been suppressed.
Demand-pull inflation : When the available aggregate supply of goods and services is lesser than
the aggregate demand, prices tend to rise. This situation of disequilibrium can be corrected
either by increase in prices or increase in input. But no increase in output is possible as full-employment
of factors of production is assumed. Finally prices rise sufficiently to bring about equilibrium between
demand and supply. Forces like population growth, rising money income etc. play a significant role
in generating Demand pull inflation.
Cost-push inflation : It occurs when prices rise due to an increase in the cost of production on
account of rising wages, high profit margins and increase in commodity taxes. Due to rising cost of
living, workers demand higher wages which we will be compensated by the production by increasing
the prices of the products to a higher level.
Seller’s inflation : Rising prices due to wage-push and cost-push have been called seller’s
inflation.
Credit inflation : when the inflation occurs due to excessive expansion of bank credit or money
supply, it is called as credit inflation.
Scarcity inflation : whenever scarcity of real goods occurs or artificially created by hoarding activities
of traders and speculators which may result in black marketing, there by leading to rise in prices. This
is called scarcity inflation.
Stagflation : Recently a new phenomenon is observed – stagnation in the midst of inflation.
This known as stagflation which implies inflation and slow growth. There is stagnation in certain key
sectors of Indian economy for the following reasons:
• Shortage and irregular supplies of raw material and components.
• Power crises and unscheduled power cuts.
• Adverse industrial relations [labour disputes].
• Bottlenecks [say, delays in issuing licences].
All these factors jointly cause stagnation on the economy but at the same time there is
unemployment and inflation. Such a situation is described as Stagnation. Inflation is categorised based
on the severity of it into the following:
Creeping inflation : when the prices increase by about 2% per year, it may be called “creeping
inflation”.
Walking inflation: when the rate of inflation is less than 10% annually, economists call it as
“walking inflation” or “moderate inflation” where people’s expectations remain more or less
stable.
Running inflation: It emerges when the prices rise rapidly. When price rise by more than
10% a year, running inflation occurs. It ranges between 10 – 20 percent. If the rate of inflation exceeds, it
may be called “galloping inflation”. When prices are rising at double- or triple- digit rates i.e. 20%,
100 or 200% a year, such a situation may be described as “galloping inflation”.
Hyper inflation: During this period, prices may rise over 1000% per year. The purchasing power
of the people reaches very low level, real wages fall and inequalities increases. Usually it occurs during
war or emergency. Finally, it may result in serious disruptions and distortions in the overall economic
condition.
Causes of Inflation:
Inflation occurs when the total demand for goods and services exceeds their total supply at the
current price levels. The following are some major factors which cause inflation:
Changes in money supply : Increase in money supply due to various reasons, such as wars and
expansion of bank credit or deficit financing, causes a rise in the money income of the people
leading to a rise in demand for goods. Increase in government expenditure on large
development project.
Disposable income :
An increase in the disposable income of the consumers leads to an increase in the demand for goods
and services. Disposable income may increase due to a fall in the level of taxation an increase in
national income. A fall in the saving ratio. Demand for commodities may increase due to
introduction of hire purchase and instalment scheme.

Effects of Inflation : A period of prolonged persistent inflation results in economic, political and
moral disruption of society. Inflation affects different groups of individuals in different ways. Some are
favourably affected and some are adversely affected.
Mild inflation is beneficial for the economy because it stimulates production, employment and
income. When prices rise, costs do not rise immediately as a result profit increases and it
encourages further investment. But inflation goes beyond a certain limit, it reduces production and
increased unemployment. Due to a fall in the value of money, savings and capital formation are
discouraged.
Effect on produces : Producers and traders gain during inflation. Prices rise much more than
production cost because production cost remains more or less fixed in short run and do not
increase.
Effect on wage and salary earners : People earning wages and regular salaries suffer during
inflation because salaries and wages in a lesser proportion to the rise in price.
Effect on fixed income group : The worst affected group during inflation is this group because their
income is fixed but the cost of living increases due to rising prices.
Effect on formers : Formers gain during inflation because the prices of farm products increases much
faster than production cost leading to higher profits. Thus inflation is unjust because it transform
the income from the poor to rich. It harms the interest of economically weaker sections of the
society, middle class and fixed income group and favours businessmen, traders and formers.
Control of Inflation : Following are the measures which can be taken to control inflation:
Direct measures : it includes direct control on prices and rationing of scarce goods. Government
imposes certain price control on certain goods and should not allow it to rise further.
Fiscal measures : Fiscal policy refers to the policies of the government in relation to public
expenditure and taxation. Reducing government expenditure on unproductive works will have a
stabilizing effect during inflationary periods. Encouraging the public to scarify their current
consumption will also reduce demand.
Government can also introduce ‘compulsory savings scheme by deducting certain amount from
wages & salaries to be credited to workers savings account.
Monetary measures : To regulate and control money supply in the economy, central bank may
adopt certain measures. It usually uses monetary policy to control inflation .By restricting bank
audit, RBI reduces the volume of money supply by selling government securities in the open
market. Money supply can be controlled by increasing the rate of interest to reduce borrowings. This
helps in reducing aggregate demand and prices.
Inflation can be controlled by diverting resources towards the production of necessary commodities,
instead of luxury items and b. Import restrictions can be relaxed to increase the supply of essential
commodities which help to reduce inflationary pressures. Government should try to restrict
the growth rate of population.
 Introduction to Managerial Economics

Managerial Economics means application of economic theory to the problems of

management. It is concerned with the applicability of economic concepts and analysis to
decision- making in business. The prime function of a management executive in a business
organization is decision making and forward planning. Decision- making means the process
of selecting one action form two or more alternative courses of action. Whereas, forward
planning means establishing plans for future.
The questions of choice arises because resources such as capital, land, labour and
management are limited and can be employed in the alternative uses. Thus, the decision –
making function becomes one of making choices or decisions that will be the most effective
means of attaining a desired end, say, profit maximization. Once a decision is made about
the particular goal to be achieved, plans as to production, pricing, capital, raw material,
labour etc., are prepared. Thus, forward planning goes hand in hand with decision- making.
A Significant characteristics of the conditions in which business organizations work
and take decisions is uncertainty. And this fact of uncertainty not only makes the function of
decision-making and forward planning more complicated but adds different dimensions to
it. If the knowledge of the future were perfect, plans could be formulated without error and
hence without any need for subsequent revision. However, in the real world, the business
manages rarely has complete information and estimates about future predicted as best as
possible. As plans are implemented over period of time, more facts become known, so that
in their light, plans may be revised, and a different course of action adopted. Managers are ,
thus, engaged in a continuous process of decision – making through an uncertain future and
the overall problem confronting them is one of the adjustment to uncertainty.
In fulfilling the function of decision –making in an uncertainty frame work, economic
theory can be applied into service with considerable advantage. Economic theory deals with
a number of concepts and principles relating to profit, demand, cost-analysis , pricing,
production, competition, business cycles, national income etc. . The way economic analysis
can be used towards solving business problems, constitutes the subject matter of
Managerial Economics.
Significance of Managerial Economics :
Managerial Economics presents those aspects of traditional economics which are
relevant for business decision- making in real life. It also incorporates useful ideas from
other disciplines such as psychology, sociology, Mathematics, Statistics etc., if they are
found relevant for decision making. Managerial economics helps in reaching a variety of
business decisions. For example:
- What products and services should be produced?
- What inputs and production techniques should be used?
- How much output should be produced and at what prices it should be sold?
- What are the best sizes and locations of new plants?
- How should the available capital be allocated?
- In what project investments should be made? etc.
-
Characteristics of Managerial Economics :
• It is a micro economics in character. This is because the unit of study is a firm. It
deals with all the economic problems of a business enterprise. But it does not deal with
entire economy as a unit of study.
• Managerial Economics largely uses the body of economic concepts and principles
which is known as “Theory of the firm” or “Economics of the firm”. It also seeks to apply
profit theory which forms part of distribution theories in economics.
• Managerial Economics belongs to normative economics and it is prescriptive in nature.
It is concerned with what decisions ought to be made and hence involves value judgments.
This has two factors:
1) First, it tells us what aim and objectives of a firm should pursue ,
2) Secondly, objectives having been defined, it tells us how best to achieve these
aims and objectives in particular situations. Therefore, Managerial Economics has
been described as “Normative Micro Economics of the firm”.
• Macro Economics is also useful to Managerial Economics since it provides an
intelligent understanding of the environment in which business must operate. This
understanding enables a business executive to adjust in the best possible manner with
external forces.
Scope of Managerial Economics and its relations to other subjects :
Scope of Managerial Economics : The scope of Managerial Economics is so wide that it
covers almost all the problems and areas of managers and the business firm. It provides
adequate amount of guidance to business executive in running a business enterprise on
prudent commercial practices. It deals with demand analysis, Demand forecasting,
Production function , cost analysis, Inventory Management, Pricing methods, Capital
budgeting, etc.,. A brief description of some important factors constitute the scope of
Managerial Economics is given below.
A) Demand Analysis and Demand Forecasting : Demand Analysis helps in identifying
the various factors influencing the demand for a firm’s product and thus provides
guidelines to manipulate demand. Once the business man knows the factor which is
largely influencing demand for his product, he will be able to take necessary
measure to accelerate the demand with in time.

Before production schedules can be prepared and resources employed, a forecast of

future sale is essential. This forecast also can serve as guide to management for
maintaining or strengthening market position and enlarging profits. Therefore,
Demand Analysis and Demand forecasting are essential for business planning and
occupies a strategic place in Managerial Economics.
B) Production Function : Another important area of Managerial Economics is
production function. Once demand is estimated, the next requirements is to identify
the sources of production, scale of production, establishing relationship among
factors production [Land, labour, capital and organization]. One of the chief topics
covered under production analysis is “Economics and diseconomies of sale”.
C) Cost Analysis : The determination of cost, the methods of estimating cost, the
relationships between cost and output are useful for management decisions. The
factors causing variations in cost must be recognized and allowed for if management
is to arrive at cost estimates which are significant for planning purpose. An element
of cost uncertainty exist because all the factors determining economic cost and
being able to measure them are necessary steps for more effective profit planning ,
cost control and often for sound pricing practices.
D) Inventory Management : It refers to stock of raw-material which a firm keeps. The
problem is how much of inventory is the ideal stock. If it is high, unnecessarily capital
will be blocked and as a result of which firm loses an opportunity of making good
profit. If inventory is low, production will be adversely affected. So, manufacturing
firm will have to minimize inventory cost. Ex: Economic order quantity [EOQ]
Analysis and ABC analysis [Always Better Control].
E) Advertising : Producing a commodity is one thing, to marketing is another.
Therefore, advertising is an integral part of decision –making and forward planning
as the message about the product should reach the consumer before he thinks of
buying as there is no meaning in producing without selling.
F) Pricing : It is very important area of Managerial Economics. The success of a business
firm largely depends on the correctness of the price decision taken by it. The
important aspects dealt with under this area are: Price determination in various
markets, pricing methods, Differential Pricing, Product line pricing and pricing & its
forecasting.
G) Profit Management : The success of any business can be measured by its profits in
the long – run. If the knowledge about the future was perfect, profit analysis would
have been a very easy task. However, in a world of uncertainty, expectations are not
always realized so that profit planning and measurement constitute the difficult area
of Managerial Economics. The important areas covered under this area:
Measurement of profit, Profit policies and techniques of profit like Break-Even-
Analysis.
H) Capital Budgeting : Capital is scarce and it has a price. So one has to utilize scarce
capital in the best manner possible so as to get the best out of it. If the managers
wishes to arrive at meaningful decisions, he must have a thorough understanding of
the capital budgeting. The main topics are: Cost of Capital, Rate of return, and
Selection of Projects.
Relation of Managerial Economics with other subjects : Managerial Economics
incorporates certain important ideas from various other subjects if they are found
relevant in solving the real life problems of business enterprises.
1) Managerial Economics and Economics : The relationship between
Managerial Economics and Economics is like that of Engineering Science to
physics or of Medicine to Biology. Managerial Economics has its wider scope
lies in applying economic theory to solve real life problems of enterprises.
Both Managerial Economics and Economics theory deals with problems of
scarcity and resources allocation .Business economists have also found the
following main areas of economics as useful in their work.
A) Demand Theory
B) Theory of firm –price, output and investment decisions
C) Business financing
D) Money and banking
E) National Income and social Accounting
F) Public Finance and Fiscal policy
G) Economics and developing countries ,etc.

2) Managerial Economics and Accounting : Managerial Economics is closely

related to accounting. Accounting is concerned with recording the financial
operations of a business firm. Indeed, accounting information is one of the
principal sources of data required by a managerial economist for his decision-
making process. For instance, the profit and loss statement of a firm tells
how well the firm has done and the information it contains can be used by
managerial economists to throw significant light on the future course of
action – whether it should improve or close down.

3) Managerial Economics and Mathematics : The major problem of the firm is

how to maximize profit, or to optimize scale of production etc., Mathematical
concepts & Technique are widely used in economic logic to solve these
problems. Linear programming, inventory models and game theory find wide
applications in Managerial Economics.

4) Managerial Economics and Statistics : Statistics is important to Managerial

Economics in several ways. Managerial Economics needs the tools of
statistics in more than one way. A successful businessman must correctly
 estimate the demand for his product. He should be able to analyze the
impact of variations in tastes, fashions and changes in income and demand.
Statistical methods provide a sure base for decision- making. Statistical tools
like theory of probability and forecasting techniques.

5) Managerial Economics and Operational Research : various tools of operating

research like linear programme, theory of game, theory of transportation are
helpful to economist in decision-making. The significant relationship between
Managerial Economics and operational research can be highlighted with
reference to certain important problems of Managerial Economics which are
solved with the help of OR techniques. The problems are: Allocation
problems, Competition problems, Inventory problems etc.,

6) Managerial Economics and computer science : Computers have changed the

way the world functions and economic or business activity is no exception.
Computers are used in accounts maintenance inventory and stock controls
and supply and demand predictions.

7) Managerial Economics and Management : Decision-making is one of the

major functions of management. Managerial Economics helps management
in arriving at right decisions at the right time with the help of some concepts
like forecasting, Production function, and proper control functions like
inventory control, Statistical control in setting prices etc.,

Demand Analysis , Law of Demand and its assumptions

The concept of Demand : The term ‘Demand’ refers to the quantity demanded for a
commodity per unit of time at a given price. It is also defined as a desire backed by an ability
and willingness to pay. Mere desire of a person to purchase a commodity is not his demand.
He must possess adequate resources and must be willing to spend his resources to buy the
commodity. It means, demand for any commodity is based on the following:
1) The desire of a consumer for a product ,
2) The purchasing power of the consumer, and
3). The willingness to buy it .
For example, every one desires to posses car but only a few have the ability to buy it. So
everybody cannot be said to have a demand for car.

The Law of Demand : The relation of price to sales is known in economics as the “Law of
Demand”. It explains the inverse relationship between the demand and price. If the price
falls, demand increases and vice-versa provided the other conditions of demand remain
constant. The assumption ‘the other factors and conditions remain constant’ implies that
income of the consumers, prices of the substitutes and complementary goods, consumer’s
taste and preferences and number of consumers, etc remain unchanged. Thus, the
relationship between the variations in price and quantity demanded is known as “Law of
Demand”.

Assumptions of ‘Law of Demand’ are as follows :

Law of Demand holds good when the following things occur:
A) No change in consumer’s taste and preferences.
B) Income of the consumer should remain constant.
C) Prices of other goods should not change.
D) There should be no substitute for the commodity or prices of substitutes remain
unchanged
E) There demand for the commodity should be continuous, means it is not of a
seasonal profit.
F) .People should not expect any change in the price, availability of product and his
income in near future.

Demand Schedule : The “Law of Demand” can be illustrated through a demand schedule. A
demand schedule is a series of quantities which consumer would like to buy per unit of time
at different prices. In other words , it is a table or statement showing how much of a
commodity is demanded in a particular market at different prices. Price- Quantity relation is
shown automatically in the form of a table showing prices and corresponding quantitative.
We give an illustration of the “Demand Schedule” below.
Demand Schedule

Price of Product Quantity demanded at given price

Rs.5 80 units

Rs.4 100 units

Rs.3 150 units

Rs.2 200 units

Rs.1 300 units

Demand Curve : The “Law of Demand” can also be presented through a demand curve. An
example of the ‘Demand Curve’ is given below
In the following graphical presentation D,D1 is the demand curve of a commodity.
The curve slopes downward from left to right indicating when price rises, less is demanded
and when price falls, more is demanded. This kind of a slope is known as “Negative slope”.

The demand curve concentrates exclusively on the price-quantity relationship. The

relationship between quantity demanded and other variables are not shown by the demand
curve. The price quantity relationship is also expressed algebraically in the form of the
following equation.
Q= f(p) means that Quantity demanded is function of price.
Why demand Curve Slopes downward from left to right?
1) The relationship between price and quantity demanded is inverse.
2) As the price of the commodity falls, new consumers purchase the commodity, as a
result, the quantity demand will rise because of that when the price of the
 commodity falls, it becomes a cheaper good, so consumer substitutes the cheaper
goods. This effect is called ‘Substitution Effect’.
3) The Existing consumer also purchases additional units, as the commodity becomes
cheaper. This is because of ‘Income Effect’. Means, when price of a commodity
falls, the disposable income of the consumer increases and the increased disposal
income enables the consumer to buy more.
Expectation to the general ‘Law of Demand’:- The ‘Law of Demand’ does not hold good in
the following cases or conditions.
A) Veflen goods : The law does not apply to the commodities which serve as ‘Status
Symbol’, enhance ‘Social Prestige’ or display wealth and richness Ex: gold, precious
stones[Diamonds], rare paintings, costly decorative items, etc. Rich people buy such
goods mainly because their prices are high.
B) Giffen goods : Giffen goods does not mean any specific commodity. It may be any
commodity much cheaper than its substitutes, consumed by the poor households as
essential consumer goods. If the prices of such goods increases[price of its substitute
remaining constant], its demand increases instead of decreasing. These goods are
named after Robert Giffen [1837-1910].
In Ireland he found that people were so poor that they spent a major part of
income on potatoes and a small part on meat. When the prices of Potatoes
rise, they had to economize on meat even to maintain the same consumption
of potatoes. Further, to fill up the resulting gap in food supply caused by a
reduction in meat consumption, more potatoes had to be purchased because
potatoes were still the cheapest food. Thus the rise in the prices of potatoes
led to increased sales of potatoes.
C) Speculative Effect : In case of share trading, when there is an exception of further
rise in the prices of shares, the demand will grow more and more even with a rising
prices and vice-versa.
D) Ignorance of consumer : Some consumers think that the product is superior if the
price is high and vice-versa.
E) Fear of Scarcity : If the consumer thinks that the product may not be available in
adequate quantities in near future due to certain reasons, he will definitely purchase
more quantities at current prices[ Even though price is high] with the fear of scarcity
 or if thinks that there may be any increase in the price of product in near future, he
may buy more at higher prices

Individual Demand: The Quantity demanded by an individual consumer at a give price is

known as Individual Demand.
Market or Total Demand: The total Quantity demanded by all the purchasers together is
known as market demand. The market demand for a commodity can be calculated by
adding the quantities demanded by all the purchasers.

Price Demand : If demand of a commodity is influenced by its price only , the demand is said
to be price demand which is nothing but ‘Law of Demand’.
Q=f(p)
Income Demand : If a change in quantity demanded of a commodity is caused by income of
consumer provided other factors remain constant , demand is said to be "Income demand".
Q= f(I) means that quantity demanded is function of Income.
Cross Demand : If price of one commodity influence the demand of another related
commodity [ it may be substitute or complement], the demand for commodity is called as ‘
Cross Demand’.
Q of product(A) = f (P of product(B)) means quantity demanded of
product(A) is function of price of product(B) .
Factors Determining Demand[Or]Factors influencing Demand :
The demand for a product is determined by a number of factors, viz., price of the
product, price and availability of the substitutes, consumers income, his own preferences
for a commodity, utility derived from the commodity, demonstration effect, advertisement,
credit facility by the seller and banks, off season discounts, multiplicity in the use of the
commodity, population of the country, consumers expectations regarding the future trend
in the price of the product, consumers wealth, past levels of demand and income,
Government policies, etc., But all these factors are not important. We shall discuss here
some important determinants of demand for a product.
1) Price of the commodity : Price is the most important determinant of the quantity
demanded of a commodity. The price quantity relationship is the central theme of
demand theory. The nature of relationship between price of a commodity and its
quantity demanded has already been discussed under the ‘Law of Demand’.
2) Price of substitutes and complementary goods : The demand for a commodity
depends also on the levels of the prices of its substitutes and complementary goods.
Substitutes : Two commodities are deemed to be substitute for each other if
changes in the price of one affects the demand for the other in the same direction.
The relation between demand of a product and the price of its substitute is positive
in nature. For instance: Tea and Coffee are substitutes to each other if a rise in the
price of a coffee increases the demand for tea and versa.

Complements : A commodity is deemed to be a complement of another when it

complements the use of the other. In other words, when the use of any two goods goes
together so that their demand changes [increase or decrease] simultaneously, they are
treated as complementary. For example petrol is complement to motor car, butter and jam
are complementary to bread, Technically, two goods are complements to one another if an
increase in the price of one causes a decrease in the demand for a good and the price of its
complement for instance an increase in price of petrol causes a decrease in the demand for
car other things remaining the same.
3) Consumer's Income: Income is the basic determinant of the Quantity demanded for
a product as it determines the purchasing power of the consumer. That is why
people with higher current disposable income spend a large amount on goods and
services than those with lower income. For the purpose of income- demand analysis,
goods and services may be grouped under four broad categories, viz., (a) Essential
consumer goods (b) Inferior goods (c) Normal goods, and (d) prestige or luxury
goods. The relationship between income and different kinds of goods is presented
through the Income demand curves.
a) Essential Consumer goods : The goods and services which fall in this category are
essentially consumed by almost all persons of a society. Quantity demanded of such
goods increases with increase in consumer’s income only up to a certain limit. As
below , ECG curve shows consumers demand for these goods increases until his
income rises to OY, and beyond this level of income, it does not. It tells us that
proportion expenditure on essential goods increases as income increases.
 b) Inferior Goods : Inferior and superior are generally known to both consumers and
sellers. However, a commodity is deemed to be inferior if it s demand decreases with the
increase in consumer’s income. Demand for such goods may initially increase with increase
in income [say up to y1] but it decreases when income increases beyond certain level.

c) Normal goods : Clothing is the most important examples of this category of goods.
Normally, these goods are demanded in increasing quantities as consumer’s income rises.
Demand for normal goods initially increases rapidly, and later at low rate. With the increase
in consumer’s income, its income elasticity decreases.

d) Luxury or prestige goods : Prestige goods are those goods which are consumed
mostly by the rich sections of the society, e.g. precious stones, studded jewellery, costly
cosmetics, T.V sets, refrigerators, decoration items etc,. Demand for such goods arises only
beyond a certain level of consumer’s income. The relationship between income- demands of
these category goods is shown by the following graphical presentation.

4) Consumer taste and preference : Consumer’s taste and preferences play an

important role in determining the demand for a product. Taste and preferences
depend, generally, on the social customs, religious values attached to the
 commodity, habits of the people, the general life- style of the society and also the
age and sex of the consumer’s. Change in these factors changes consumer’s taste
and preferences. As a result, consumers reduce or give up the consumption of some
goods and include some others in their consumption basket.
5) Consumer’s Expectations : This is another important factor which has important role
to play in determining the demand for goods in the short- run. If consumer expect a
rise either in the price of the commodity in near future or increase in income on
account of announcement of revision of pay-scales or scarcity of certain goods in
near future, they would buy more of it at its current price.
6) Demonstration Effect : When new commodities or new models of existing ones
appear in the market, rich people by them first. Some people by new goods or new
models of goods because they have genuine need for them while others buy because
they want to exhibit their affluence. The purchases by the later category of the
consumers are made out of certain feelings such as jealousy, competition, equality,
social inferiority and desire to raise their social status. Purchases made on account of
these factors are the result of ‘Demonstration Effect’. These effects have a positive
effect on the demand.
7) Snob Effect : When a commodity becomes the thing of common use, some people,
mostly richly, decrease or give-up the consumptions of such goods. This is known as
‘Snob Effect’. It has negative effect on the demand for the related goods.
8) Consumer- credit facilities : Availability of credit to the consumer from the sellers,
banks, relations and friends or from any other source encourages the consumers to
buy more than what they would buy in the absence of credit facility. That is why the
consumers who can borrow more can consume more than those who can borrow
less.
9) Population of the country : Total domestic demand for a product depends also on
the size of the population. Given the price, per capita income, taste and preferences,
etc., the larger the population, the larger the demand for a product. When an
increase in the size of population, demand for the product will increase.
10) Distribution of National Income : Apart from the levels of individual incomes, the
distribution pattern of national income also affects the demand for a commodity. If
national income is evenly distributed, i.e., if majority of population belongs to the
 lower income groups, market demand for essential goods [ including inferiors] will
be the largest whereas the same for the other kinds of goods will be relatively low.

Elasticity of Demand
Elasticity of Demand: The ‘Law of Demand’ states that any change in price of a commodity
brings about change in the quantity of a commodity demanded. It tells us that when price of
the commodity rises the demand will fall and when fall in price, demand will rise. Though
the law of demand explains the inverse relationship between price and quantity purchased,
it fails to explain by how much the quantity demanded increases as a result of a fall in the
price or vice versa , i.e. , the law of demand simply tells us the direction of change as a
consequence of change in the price and not the rate at which the change takes place. On
the other hand, the elasticity of demanded measures the rate of change in demand as a
result of change in the price. Thus, it is clear that the law of demand explains the
quanlitative aspect of demand where as the elasticity of demand explains the quantitative
aspect of demand.
Alfred Marshall who introduced the concept of elasticity of demand in economics,
defined as “ The Elasticity of demand in a market is a great or small according to the amount
demanded increases much or little for a given fall in price and diminishes much or little for a
given rise in price”.
Kenneth Bolding states that “Elasticity of demand measures the responsiveness of
demand to changes in price”.
By examining the above definitions of the popular economists, we can state that the
price elasticity of demand represents the rate change in the demanded as a consequence of
rise/ fall in price of commodity.
In general cases, we can say, Elasticity of demand is a quantitative measurement of
the change in demand on account of a given change in any demand determinant [means it is
not confined to price].
Types of elasticity of demand :
• Price Elasticity of demand
• Income Elasticity of Demand
• Cross Elasticity of Demand
Price Elasticity of demand : The price elasticity of demand may be defined as the ratio of
the percentage change in demand to percentage change in price. The price elasticity may
be measured by the following way :

Where Ep= Price Elasticity of demand

Q1= Quantity demanded before change in price
Q2= Quantity demanded after change in price
P1= Price before change
P2= Price after change

Income Elasticity of Demand : The Income Elasticity of demand is defined as a ratio of

percentage or proportional change in the quantity demanded to the percentage change in
income. It measures the degree of responsive in quantity demanded due to change in
income.

Income Elasticity of Demand [ IE] = Proportionate change in quantity demand

Proportionate change in Income of consumer
Where E I= Income Elasticity of Demand

= Change in quantity demanded

Q1= Quantity demanded before charge in Income

I 1= Income before change

Cross Elasticity of Demand: This may be defined as “the Proportionate change in the
quantity demanded of a particular commodity in response to a change in the price of
another related commodity [related commodity may be substitute or complementary
good].

Ec = Q(A) Q(A) P1(B)

Q1(A) = Q1(A) P(B)

P(B)
P1(B)

Where EC= Cross Elasticity of demand

Note: Cross Elasticity of demand is positive in case of substitutes and negative in case of
complementary goods.
Significance of Elasticity of Demand: The concept of Elasticity of demand is of much
practical importance. Because elasticity of demand helps the government and business man
in so many ways as under:
 - It guided the business in fixing the right price for commodity.
- It decides the level of production.
- It helps in determining rewards to factors of production.
- It will also influence wages.
- It helps government before fixing or imposing price control on good.
- It helps government in formulating tax policies.
- It helps in deciding about industrial and Economic policies.
Different relationships between price and quality:
( Or)
Types of Price Elasticity of Demand: Generally, a small fall in the price of a commodity may
increase the demand of a commodity considerably. But the change in demand will not be
the same for all commodities. It differs from product to product. For example Necessary
goods such as Rice and Wheat are purchased in a fixed quantity even the price of these
commodities is high or low. So, the demands for necessary goods are inelastic. When the
price of these goods fall, the demand will increase considerably, Hence, there are five
different relationships possible between a change in price and quantity demanded as
follows:
a) Perfectly Elastic Demand: No change or a small change in price leads to an unlimited
extension or infinite change in demand, it is called ‘Perfectly Elastic Demand’. Ex: A small
rise in price causes the demand to fall to zero i.e., E= Infinite. In this case, the shape of
demand curve is horizontal to ‘X’ axis

b) Perfectly Inelastic Demand : Demand is said to be inelastic when the quantity

demanded remains unchanged irrespective of any rise or fall in the price of the commodity.
Means , responsiveness to a change in price is nil. The shape of demand curve in this case is
vertical to ‘Y’ axis.

c) Relatively
Inelastic
Demand : In this case, the proportionate change in the quantity demanded is less than that
of price. A large change in price leads to a small change in quantity demanded. The shape
demand curve is more of steps.

d) Relatively Elastic Demand : The proportionate change in the quantity demanded is

greater than that of price. In other words , a small change in price leads to a big change in
quantity demanded, demand is said to be Relatively Elastic . In this , Elasticity of demand is
greater than one. The shape of demand curve is more of a flat.
e) Unity Elasticity of Demand : When proportionate change in price brings about an equal
proportionate change in the demand, elasticity of demand is equal to one. The shape of
demand curve is slope line.

Factors determining or influencing elasticity of demand : The following factors will

influence the elasticity of demand for any product :
1) Nature of commodity
2) Number of uses of a commodity
3) Availability of substitutes
4) Durability of commodity
 5) Possibility of postponement purchase
6) Proportion of income spent on commodity
7) Habitual necessaries
8) Time period under consideration
9) Income level
10) Purchase frequency of a product
A brief description of above factors is given under:
1) Nature of Commodity: The elasticity of demand depends upon the nature of a
commodity. Generally, the demand for necessaries will be inelastic, where as the demand
for luxuries will be elastic . However, we cannot make a generalization that the demand for
luxuries is elastic and the demands for necessaries are inelastic due to the following reasons
A) Certain goods may be luxuries for some people but necessaries for others. For
example: A car may be luxury for a common man but it is necessary for a doctor. So,
the elasticity for the same commodity may differ from place to place and from
person to person.
B) If the commodity has close substitutes available at reasonable prices, then the
demand for the commodity will be elastic. When commodity has no substitute , it
has inelastic demand. For example salt has no substitute, therefore, the demand for
salt is always inelastic. Wheat is necessary good, but it has substitutes. The demand
for wheat can be elastic even though it is necessary.
2) Number of uses of Commodity : A commodity having a variety of uses has comparatively
elastic demand ,example : electricity . On the other hand, the demand is inelastic for
commodity having limited or single use. For ex: Steel can be used for many purposes. A
slight fall in its price will bring forth demand from many quarters and hence demand is
elastic.
3) Availability of Substitutes : If the Commodity has no substitutes, its demand will be
inelastic. If commodity has substitutes, the demand will be elastic. Example: If bus fares rise,
people will use train or any other cheap means of transportation. Therefore bus passenger
services have elastic demand.
4) Durability of Commodity : The demand for durable goods such as Radio, Television and
Fan has elastic demand. When the price of these goods rises, people may prefer to get the
old things repaired than to buy new things. Therefore, the demand for durables will fall.
5) Possibility of Postponement of Purchase of Product : Price elasticity is also affected by
the possibility of postponement of product purchase. If the consumption of a commodity
cannot be postponed than it will have inelastic demand. On the other hand, if the
consumption of a commodity can be postponed then it will have elastic demand. For
example: Salt, food grains cannot be postponed. Hence, they have inelastic demand.
6) Proportion of income spent on commodity : If a consumer spends only a small amount
on the commodity, its demand will be inelastic. For example: The amounts we spent on
news papers, Match Boxes, Shoe polish etc., are very small. Therefore, even if the price of
these products raises the demand will not fall . On the other hand, if the amount spent on
commodity is large , the demand will be elastic. Ex: T.V, Refrigerator etc.,
7) Habitual necessaries : If the consumers are addicted to a commodity due to habit and
customs the demand for commodity will be inelastic. Because once consumer is addicted to
a product, he will not reduce the consumption even price of the product is increasing, For
example: Cigarettes, Liquor etc.,
8) Time Period under Consideration : Time plays an important role in determining elasticity
of demand. Generally, demand is inelastic during short period and elastic during the long
period. This is because in the long- run consumer can change their consumption habit in
favour of cheaper substitutes against the expensive commodities. Therefore, in the long-
run, elasticity is generally higher for all commodities.
9) Income level : Higher income group people are less affected by price changes than low
income group people. Demand for high priced and quality goods is inelastic for high income
groups whereas the same is elastic for low income group people. A rich man will not certain
consumption of Fruits and Milk even if the prices rise significantly and will continue to
purchase the same quantities as before. But a poor man cannot do so. Hence, the demand
for the fruits and milk is inelastic.
10) Purchase frequency of a Product: If the frequency of purchase of a product is very high,
its demand is likely to be more price elastic than in the case of a product which is purchased
less often.
 Demand Forecasting and its Methods
Meaning of Demand Forecasting : Demand forecasting is an estimation of the future
demand for any product. As we know that, there is a relation between the input and output,
so unless we are sure about a fixed quantity of output there is no meaning in acquiring the
input. Thus, one has to decide about the future demand, such that he can plan his
investment strategy. There is no meaning in producing if there is no market for the said
products. So, necessary steps should be taken to know the future such that we can plan our
strategy to meet the demand in near future is called as demand forecasting.
Significance of Demand forecasting : Demand forecasting helps in inventory management,
production planning and also sales management, financial management. It helps production
department in maintaining proper levels of stores and raw material by that it reduces
unnecessary burden on financial management. It also helps production Management to plan
for the reduction or expansion of plant capacity and helps in marketing and distribution of
the finished products with the help of budgets it will be very convenient for the finance
department to provide funds for various purposes from various sources without much
difficulty.
Factors involved in Demand Forecasting:
Forecast Period : It is very important factor to be taken into consideration ‘How far ahead’?
This problem is solved by having both short-run and long-run forecasting. How far ahead the
long-term forecasts go depends upon the nature of the industry. It may be necessary to look
20 years a head in case of certain industries because of the close link with capital
expenditure forecasting. For example: Petroleum companies, shipping companies, paper
mills, in view of the long life of the fixed assets, do have to forecast well deep into the
future. Short- term forecasting may cover a period of three months, six months or one year.
Which period is to chosen depends on the nature of business. When demand fluctuates
from one month to another, a very short period should be taken.
1) Level of forecasting : At what level and how many levels the forecasting activity be
under taken? Is another questions arises while planning demand forecasting. Demand
forecasting may be undertaken at three different level such as macro level, industry
level and firm level.
2) Should the forecast be general or Specific ? : The firm may find a general forecast
useful, but it usually needs to be broken down into commodity/ product-wise
forecasts and forecasts by area of sale.
3) Type of forecasting method : Selection of suitable forecasting method is another
activity which should be given proper attention. This is because of that the problems
and methods of forecasting are usually different for new product from those for
products already well established in the market.
4) Classification of products : For selection of suitable demand forecasting method,
classifying the products into different types is another activity to be undertaken. As
each type of product has different patterns of demand, it is important to classify
products as producer goods, consumer durables or consumer goods and services.
5) Paying attentions towards certain special factors : Special factors peculiar to the
product and market must be taken into account in every forecast. Factors like: A)
Nature of the competition in the market , B) Possibility of error or inaccuracy in the
forecast. C) Political development in the country like general elections ,
D) Sociological factors, changes in cultural environnent , E) The role of psychology in
demand , F) What people think about products and brands? etc. are to be considered
while forecasting demand.
SHORT QUESTIONS:
1. Define Economics?
2. What is called as Economic Activity?
3. Describe Micro and Macro-economics.
4. Outline GDP and its importance.
5. What is the difference between GDP ang GNP?
6. How the National Income is being calculated?
7. What is meant by inflation?
8. How managerial economics can be differentiated from economics.
9. Define Demand from both customer view and seller view.
10. Define Law of Demand.
11. What is Elasticity of Demand?
12. Define demand forecasting.
ESSAY QUESTIONS:
1. List and define the characteristic feature of economics.
2. Describe the scope of managerial economics with its importance.
3. Explain the concepts of macro-economics in detail.
4. What is Managerial Economics and explain its nature and feature?
5. Explain the exceptions of law of demand with examples.
6. What are the demand determinants influences for the electrical car launching in
India?
7. List and define the factors influencing elasticity of demand
8. Illustrate the 5 measurements of price-elasticity of demand with graphs.
9. Explain the factors influencing demand forecasting for mobile phones.
10. Explain about 4 traditional and 4 modern techniques of demand forecasting.