Economy finished for Prelims @é I asco) + ey a rd as é€ Edu Doubt? Cen me oe cet cis Ask through A race ud oogle FormsHow.many questions from Microeconomics in UPSC Prelims? TAT ee Rare Bee Cy IU Pa oer RUB ee ete oe ply) rly pli} 2019 Plir Piva rT) 2015 pry rl) ply eae acc Yet we are studying for 2 reasons 1. cost: benefit still better than random medieval history Qs. 2. 1*attempt- 1S 50:50 elimination power poorer in contemporary GS-Qs than 3” attempt walla- so somewhere else they've to prepare. No mains utility = hindi terms usually not given in this handout / ppt Audio/Video Problem,Press Ctrl RBOOKMARK THIS LINK: https://unacademy.com/course/mrunals-microeconomics-fot BSR eRe CSR g from lecture1. Tan el AOU A Sila BC Re Pom eo (eWEELae oa eee FP : Saad \@ TTT ied COMO Rk SOTA on ella EgCOTM CR TMC Kam ho rhe hai aaj ye marks £9.54 1 sh gye hai mujhe kuch samajh ah (032 Kriti Naulakha Sir, the present scenario isthata | generally don’t take doubts Enea) Ser a ea ee exe IEdownload handout RK method2 OTN]OMRON CRT OR CUM CAC CRC TRO Individual’s family/ home budget Country's budget es Individual’s Ge Country's Gop ‘ & national production = ome pRB = Pry Individual’s Import, eee demand export,BoP oy a tian ag < NUMicroeconomics Macroeconomics (aafs) when the economics |— When the study relates to the whole / aggregate study relates to an economy- national Income, Savings, Investment, individual unit or part | Unemployment, GDP, Inflation, Budget, BoP oftheeconomy. |- It gained focus after J.M. Keynes : ‘General Theory of Employment, Interest & Money’ (1936)eter ster Cu Ce) Te. Ween Nc) PCy eeLie tee LAY) RT SEE EL eS MCU Lam Lg SEO Ce ROM Lea EMC CU kCD Rs.700 per day. She chose to work as agricultural labourer. SR RUC ROUSE UCR Ona Cerro IU)} aU OLE lure (a) Rs.1,100 RR CEES CUR a CU CCid cecil) Se cece ae a Cece! (c) Rs.400 Pee Ce RCO Cte ROL eed (d) Rs.300 CUCU Prsoxsuey 2050 EVM e Clete Ba Tick it or skip it.Opportunity cost: staaz arta Farm laborer Ta UAC ae nites illage. pone rent & cost of living |] = Best Option that is NOT chosen MINUS the high. I can’t simply go there |] option that is Chosen because there is more salary! |} = i: Se RCC resi cal LdTie tee LAY) RT EEC EL eS meu Un Lat Coe village. She gets a job to work as babysitter in a nearby town @ Om Chie She chose to work as agricultural labourer. Which one of the following is the opportunity cost (era arta) aU OLE cure (a) Rs.1,100 Oy eect Cec " PT a Oe aie sisal it (a) Rs.300 SSUMMC Sa ORR LH mr MRE) RR RG UMC OR RBC RCI Criteria Free Goods i No Pe UU RCL a UEC eee If person1 is breathing, will oxygen supply get (¥) for o erson2? Hairsplittery not req microgram it'll be less. No If God/mother Nature did not want to create air, then for them, DCU eee eeu eeu ued Free/Paid Price exclusion? Rivalry in Consumption ‘Opportunity Cost?Rivalry in Consumption ‘Opportunity Cost? ee = Common Goods Public Goods: Street light, Defense Government / Donor could use that 8% for opening school or Cow-shelter instead of installing streetlightsMCQ: UPSC-CDS-2016/1 MCQ. Which one of the following is nota “Public Good”? (a) Light House (b) Electricity (c) Public Parks (d) National Defense Ca] » +MCQ: UPSC-CDS-2016/1 MCQ. Which one of the following is not a “Public Good”? CE) Mea) Bala aia (c) Public Parks (d) National Defense © ardaie aq eae = cae pod Aor fae. fet at afeepa el fear sro. * Ifyou don’t pay bill, electricity company will ‘exclude’ you! So it’s a private good / economic good.(©) Tragedy of Commons (rivalry in consumption) BOOMERS iM eLe ES Cec MAT CUTTS Mem Lele DRS NOE ESI) 1) MEIER) (Negative externality). Similarly overfishing ee EGC PAL ACN CMm elem OOD ICO)Types of Goods: you’ve to pay, else you’re excluded Private good / Economic good + Fruit, vegetable, TV, fridge, mobile handset * Price exclusion...yes * Rivalry in consumption ...yes: less units available for purchase for the next custom pI wa a Gi td Teh Club Good / Artificially scarce good Excludable, but no rivalry in consumption. Kindle Ebooks, DTH service, Netflix, Google playstore paid / freemium apps, paid softwares,Types of Goods: you’ve to pay, else you’re excluded DRS OR ea EMSC TRC GUIE Private good / Economic good + Fruit, vegetable, TV, fridge, mobile handset Another i Classify * Price exclusion...yes * Rivalry in consumption ...yes: less units available A / for sucess a next area MTs rl) Rec RG Role tcreuiiced Ieee aces * textbook Club Good / Artificially scarce good Excludable, but no rivalry in consumption. Kindle Ebooks, DTH service, Netflix, Google playstore paid / freemium apps, paid softwares, PTT Tee ee] PUM SIGE H * tobaccoTCE CR RCS Gli) It happens when a Company charges different price Meanie wan acted in to different groups of consumers for anidentical [isetieeit good. Example, = ™ 1. Microsoft & Adobe giving ‘educational- CIT MOR (cy 2. Self-financed colleges charging extra fees for NRI quota students for the same course. 3. > Airfares differ based on how early you book ne iaeR acm GEC (WTC AR a Ric eas ac ocd | OUT U UL eRe RL eA eo oe + MRP written on a packet of biscuits, O TUT UT Rue Cae SES Clg ntrol, a oe WOE CCR COCR Cer * is the legal minimum price. E.g. “ oy aes . for the farmers, OOS AM ease cee nee ec slPete Tere ee eS ESS neDesire Effective Demand but this is not demand when person wants it AND because he doesn't have MONEY HAS ability to PAYTypes of Demand for Economic goods = Willingness to buy a good Individual vs Mal @certain price @certa * Individual = household * Sum of All household demand = "MARKET Demand" Ex Ante vs. Ex Post * Ex Ante = Customer Wanted to buy (10 kg onion) Ex Post = Actually bought (5 kg onion)-price, supplyTypes of Demand for Economic goods ‘ » Willingness to buy a good a~ ee @certain price @certain time es * Car-Petrol, Tea-Sugar, Bread-Butter * Car expensive= demand of petrol falls and vice versa. ery v/s Sugar Competing demand * Substitutes of each other *Tea vs CoffeeDemand types: Composite demand (of steel) USUI SS i ch GSR LS: SL Steel = Commodity with Multiple Alternative Uses.Demand LE ble 7) ORR BIG GML DUR Use Ras ies | ; Builder ele Derived Demand from building a home y ime = Ne Final good: ‘apartment’Demand types: belies 3 am) oR BG RCSD DUE UR Ra Labour CapitalOMRON CRT OR CUM CAC CRC TRO Individual’s family/ home budget Country's budget es Individual’s Ge Country's Gop ‘ & national production = ome pRB = Pry Individual’s Import, eee demand export,BoP oy a tian ag < NUMicroeconomics Macroeconomics (aafs) when the economics |— When the study relates to the whole / aggregate study relates to an economy- national Income, Savings, Investment, individual unit or part | Unemployment, GDP, Inflation, Budget, BoP oftheeconomy. |- It gained focus after J.M. Keynes : ‘General Theory of Employment, Interest & Money’ (1936)NLU C UU ec GRACE IGC GE rere Neue RUC Costs Uy __————eLaw.of Demand (suppose a family’s income / budget is € 30) & + I've%30 + Let's buy3 cones & + We'll eat 1 cone each PRICE of 1 cone 5 Quantity demandedLaw.of Demand (suppose a family’s income / budget is € 30) @XKids you eat half-half of this single cone, Papa can’t afford @®Law of Demand aim & fagia Product price t = consumer demand | od Cle Nem Yeo OTC m CET BUSH) Yeu] ee Mel ROM ULL) remaining same / constant- ICES] C AMISH SGC Ce Mee TCR TUE CCR ROR Oe COCR eRe There is no new fashion for clothes, rival brand’s mobile SMM eI LOR Ue eal k em cnaeanenmne eeDemand Elasticity: responsiveness of demand against product price/ customer's income DS CRU ROCCE COCR CRU BCG mule 9 Cross mea —— 3) When 1 product's price (4), how much % will it affect another product’s demand? Elasticity q of at Mm 1) When product price (4), how Demand CIETSUTGIYE much % (¥) will you buy? fey Income SF Bers cisim 2) When your income (2), how much % (&) will you buy?rere NEur RUC Nace) ets UI eens 2 —Price elasticity of demand (at a1 crete) BRU ORR CR Ik eC eM OG eh CRUE CRUISE Le LEU LePrice elasticity of demand (arm @ craterca) Subs ols RATS GI Bala cals GLUE Leta normal a Less elastic 0-9%| More Elastic 11%-...]Price elasticity of demand: perfectly inelastic eP=0 Company has monopoly in supplying water. I've to no option but to buy ® Price will not change my PRICE per bottle adojs ajay, Quantity demandedMS ES UT UT il ALE Ce ec dglkghel KGa ica es CUS o Re RR ROC dl changeindemand 0% change In price ~ 10% — 0 ™euné Company has Elasticity = monopoly in supplying water. I've to no option but * 10% price (4) = 0% fall in demand. * 10% price (¥) = demand may (4) a little but everthinking, we are here to tick MCQ. to buy ® Price will not change my = 2 = o g S demand. 3Ce eS UC RoR TCG a. oi Inelastic Ele Perfect Elastic 1: Unitary BSC pa Inelastic ES Essential goods without close Luxury / non-essential goods substitutes with substitutes.Price elasticity of demand: relatively inelastic eP <1 Se ee RRs CS OR OR Rec RCE RC | 10% price (4) = (¥)demand, but, less than 10%Price elasticity of demand: relatively inelastic eP <1 SUE RRR aR Gd change indemand _ 19% change inprice 110% 30) . Milk because daily req for tea, kids. t 20, . Railways (monopoly, pot Ry ata <1 (no unit) some bulky goods can be transported only by rail.) . Tobacco by addiction 10% price (3) = (&)demand, w By a but, less than 10%Ce eS C I ROR TCI ao aa (lng Inelastic Ele Pence Elastic 1: Unitary SSC pe ERC ETS Essential goods without close Luxury / non-essential goods substitutes with substitutes.RESULT RIL CNA (LC) Rl io ed Be ee RRS Gis change indemand 15% change in price mes (4) 10% price = (¥) demand MORE than 10% Payal a ye > 1(no unit) — people shift to coke or simply avoid softdrinks avoid . Ifbuying can be postponed e.g. Jeans jew R&D more mobile handset.Ce eC OCU EU ROR TCG a (lng it Inelastic Ele Perfect Elastic NPR Ue lay SSC pa ERC ET Essential goods without close Luxury / non-essential goods substitutes with substitutes.Price elasticity of demand: unitary elastic eP =1 change indemand _ 410% bey = Uae) change in price ctl Sea ena) 10% price In CAPF-2019, they even asked mathematical sum based on this formula. But for |AS-not-soimp.MECN ROME Masa (cte Mott) ated SS Roki Hypothetical scene, happens during Will buy all cones @¥ 20. But, will buy ZERO cone 20 ) above this Sopeishoizonaline is horizontal line Gan L} we AS Perfect competition — — Infinite buyers & infinite sellers price &Ce eS UC RoR TCG a oO Inelastic Els Perfect Elastic 1: Unitary BS pa Inelastic Elastic Essential goods without close Luxury / non-essential goods substitutes with substitutes.TU SMC Cr od a. rere Neue RUC Nac) eS IY = Cc eeCan there be situation when demand slope is positive?Can there be situation when demand slope is positive?Demand curve shows positive slop when fprice rise = demand riset Seas Re DOGG RRO UR CCAIR ERC ao Snob Appeal/Veblen goods SET Ma ear Smee SU * Status Symbol, conspicuous consumption. Gi BRU A URL ecm Lm IL eR Sd) , f * Higher price = higher prestige = more demand. hs vi mist Veb! y L 5 US Economist Curfew / Emergency /Speculation | Thorstein Veblen * Expecting/fearing that price will rise even more. Oso me Price (2) —> demand (2) Price (¥) —- demand (¥) but not greatly. (iphone & painting resale value /quality , petrol : necessary)without cheaper substitutes be << Sy as 5 > Ns 3) No cheaper substitute to potato , ae 1) This is Ireland’s regular diet Scottish economist Robert Giffen (1800s)When is demand curve “positive slope” SRLS SSSR RRC Be RRR CC CRC 1)When Bz GRR Potatoes 2 Total budget 100 are cheap, 5 10 X 2kg = %20 potatoes then I'll buy 2 = %80 ka meat = More meat from my sparred budget Quantity demanded eSWhen is demand curve “positive slope” Better | stock buffer of potatoes before prices (8) even more! + I'llarrange money by (¥) meat consumption ICE of Potato _ RI) een ELL | pe)RST eMC Cl | De aCe i ACCU CCS Roo COT eeeCele MMe Leyes Le Cd do CUCL Oat CSTE CXL OLSM CM IPOM SEE) React id CMT CRH oer MUO MIRC Aan aT c Cre ccm HOR Cock ee eco P * a osRST ee CCU | De RC A CCL dl aCe melee MMU Lect SSCL Incase of iphone (Veblen good), if price (¥), demand will not ‘greatly fall’ (¥). So iphone bs rs not Giffen good. angwra Gem em at Ai a att eI ST satere CUCU Ree ois aa at (Potatoes, rice, Maize, Bajra) $e sarex 2 Some critiques say they exist in theory, notin re 9 rca oom HOR Cock em eco A Ps Ceo UCLDemand Elasticity: responsiveness of demand against product price/ customer's income When 4 product's price (&), how much % will it affect another product’s demand? (eros) OAH) Elasticit F of y ate Tm When your product price (8), Demand GES Teli how much % (¥) will you buy? fata Income Nets 3 EIN When your income (4) , how much a = % (&) will you buy?Graphs of income vs demand are called, “Engel Curves” Cee CS Cu RCC RCI y Suelo Now papa can afford ice-cream for all 3 of us! Your income / salary German StatisticianACH O CNC ACRE SCOR mC) son : Inelastic Income : ASIENIncome elasticity is positive for normal goods Sc CCRC TRU Col eS PRU RC CB Seta te Ro Rance Normal Goods: relatively more elastic Ei>1 SAE UTC eee SA UR RCT Cell % * 10% salary [2] —> More than 10% demand [#) Sa eSB ur ne) Cee okey CdIncome elasticity is positive for normal goods Se CRE Ca CURE UCU CS RE MRCOG RCM U CR CC Rb amc tcoe Normal Goods: relatively more elastic Ei>1 * 10% salary [4] —> More than 10% demand (&) (Luxury, Comfort Goods, Iphone, Movie tickets, Foreign Vacation) * 10% salary (¥) —- more than 10% demand [¥ Normal Goods: Unitary Elastic * 10% salary (2] > 10% demand (2) > Normal Goods: Relatively inelastic Ei<1 3 B} «10% salary () — less than 10% demand (&) ™ | * daily necessities soap, toothpaste- * you'll not bath & brush 4 times a day!Income elasticity demand: Perfectly inelastic (Ei=0) Mukesh Ambani will not eat 500 packets of salt just because he has ‘money’ to buy it. letras a Ca adoys ajaruan, OPES rau Pac eL I d Ei = 0: Demand perfectly inelastic for inexpensive essential items: salt, matchboxIncome Elasticity of demand (Ei) Se CC RRR RCTs ORCC When u get rich, you'll not buy more SUT) Uae BSB eB ete) Inelastic eae 4: Unitary When u get rich, you'll buy more. When income down, big drop in When u get rich, When u get rich, you demand. (e.g. iphone10 not you buy less may bath 2 times, doing well in China itself due to economic downtum despite but not 4 times a day tea eBIncome elasticity of demand for ith (Normal) Substitutes Eee Roan CoC BOA Cu eR gC Coen’ % (@) indemand _-5% Elasticity(Ei)C ee alia eae ACT Tre Ci Quantity demandedMeth Cuni hi ciast Oa ei sans ni % (2) indemand _-5% Dated Baler ae eerie a - Maize — Wheat - Kerosene — LPG Graphs otacome rs mand calle, “Ege ConeIncome Elasticity of demand (Ei) SOR CRC RR RCo eect RCT When u get rich, you'll not buy more SSSUr I) SSO Ce <1: Rel. PCIe) TSN aad Inelastic 1: Unitary When u get rich, you buy less When u get rich, you may bath 2 times, but not 4 times a day When u get rich, you'll buy more. When income down, big drop in demand. (e.g. iphone10 not doing well in China itself due to economic downtum despite being a Veblen good)Demand Elasticity: responsiveness of demand against product price/ customer's income Cre RU RU CRE RUA UIeg When 4 product's price (&), how much % will it affect another product’s demand? H(t e ei HL) Elasticity of Demand ae Pp When your product price (&), ETS (G17 how much % (¥) will you buy? ( RA WLC Te SAE stcis @)When your income (8), how es much % (4) will you buy?Demand: Cross elasticity Dg ima cur a = 10 > 230 aa ae at (¥) Demand 2cup daily > 1cup 2) Tea demand eg ) 3)Demand: Cross elasticity ely UW TSC = 10 — 230 (¥) Demand 2cup daily > 1cup 2) Tea demand (¥) 4) Coffee demand will (2)Cross Elasticity of demand: ame ya ata ar (Bar agar? at gad dis St ai eT eR eT Substitutes: Positive Cross elasticity *Tea expensive(*] —- Coffee demand rise (2) Complimentary: Negative Cross elasticity «Bread expensive (2)—> Butter demand (¥) * Petrol expensive (4) — Car demand (¥ Overthinking / Unrelated products: ZERO Cross elasticity DanC nOnCy *Tea expensive (£) — no impact on demand of req. we are here Khichdl to pass MCQs.STAR OMT M OURS NAO MeLeLeCcR UM pad Belloc) COR Mis Recerca ELT Ol aoe cts ah the eres‘Microeconomics: Laws of Demand, now the Laws of Supply rere et Neuen UC Nace) eS IES) See > —_—SOE EN SESS) SNA CUtD) 1] Actual amount available Stock: nen al 2] Supply = Amount he’s willing 3] ++Sum of individual to sell @ a particular price. firms’ supply =Market Supply /per monthSupply Curve: more price offered — more supply I'll bring out stock from my godownElasticity of Supply against “Price offered” ( ) ile) Cire tan |Elasticity of supply for Elasticity(Es) = % increase in supply produce new may Wi tage tea ate a yp nae Mona Lisaa painting from A me Ul ado|s aja,Perfect Elastic Es=-o (Hypothetical ereaftc) De ROR eC CCR GCM At 20, Pll supply my entire stock. Less than & Horizontal slopeTTC ACO en CuSO ce uC cl cur kono ci) iil oS i Sk Re LSE RIL SC (Relatively) Inelastic Es < 1 (less than one) + 110% price rise > increase in supply <10 %t SECC ee Saeed ier cd SRC Re CRC CoC RRR cies a Sg eau Geo eee so Bosc LidSupply elasticity: responsiveness to price-change (21ryfa a eretteraa) (Relatively) Inelastic Es < 1 (less than one) + 110% price rise > increase in supply <10 %f * Milk, tomatoes, electricity : + Nature of input, time consuming to produce (Relatively) Elastic Es > 1 (more than one) + 110% price offered: increase in supply greater than 10% * Durable, non-perishable Goods (unload stock from godown) * Long run: new plants, R&D- more mobiles produced Unitary Elastic Es = 1 * 110% price offered = 1 10% supply riseSupply curve: when it’s backward sloping DRC Ce CR ROR Cee ECC RRC E clot’ To spend more time on Leisure. Wants to go watch RADHE movieSupply curve shifts = poor cost benefit in preparing for exam ERROR Re RR Expansiona Ne reel TuyVERT) cee OB Cord e wa . . DET eR LD CU Ros ULC Drei ee Meera done Online / phone / postal catalogue.Oligopsony: Few ‘big buyers’ vs Many Sellers Buyer commands the price. _ BUTTS) Of Poultry PCHOT Samo Sm Ol easel its _ Buyercommandsthe price. Ex aes Les buyers Thousands Of Dairy UTES PICA EG RamMonopsony: 1 buyer (price maker) vs many sellers (price takers) BR Rao Bee AR el Mf Chair sellers/ manufacturersMonopsony: 1 buyer (price maker) vs many sellers (price takers) DRC eC ees AD Ce Indian Railways ; Defense Ministry procuring AERR ey See Ol Ob COtd DET eR CU I Res ULC DSM aoe certe) oie Melee l COL} done Online / phone / postal catalogue. Rea) aot Ve ARoC arem RS MELINA ts) AI EU RIO fF per kms cost }- @Waterways: landlocked | Non-river areaMonopoly warfare: 1 seller, many buyers ehh eR ose 7) ONLY ONE Seller e.g. Indian Railways. 4° No close substitute or competition for a particular price / service / region. * Marketing / Advertising cost = 0 Weal cn =e * Seller is the PRICE MAKER, en Transporting goods i. A - ©)Airlines / Truck: weight / H Saat |s the a HBBEN. * Duopoly= a market with just two f perkms cost .. . f- Waterways: landlocked |i firms. Butif they form a cartel, then non-river area it'll become as if it’s ‘monopoly’.ST EGAL mananaly. Natural monopoly , oe : mavonelye due to geography / climate UGS) Gas > Vanni! JAL BOARD NOVARTIS Bra ‘A Compr BAe eCOMPLEX PATENT over from Drug qa alg a garg ae Tel ae. Piped Water Supply in Delhi.Oligopoly: stea MS SG SR ICR GG y «Few sellers identical product & «intense competition among themselves e.g. IndiGo, Vistara vistara Iso price wars, discount-offers, ©" « \_ advertisement cost high. ()Oligopoly: stea Rad ib AR CAR hl PDE OR MECC IRC * ©)Cartel = IF they form a gang to restrict the supply / raise prices e.g. OPEC oil producing nations. &) Even ‘bid rigging’ in govt contracts ¢ & Solution? Statutory Competition Commission of India (CCl) underVET cece OB Core Market: where buyer and seller strike a deal. DSM aoe erte) eile melee] (ered done Online / phone / postal catalogue.Monopolistic Competition: Many buyers. MANY sellers Gt R iee Ce ke * Many buyers. MANY sellers. * Each seller has slightly different version of product (iphone vs Samsung Galaxy vs Oneplus) change in price will not instantly shift all buyers to another seller.Monopolistic Competition: Many buyers. MANY sellers FR CCR CR Sr ek eC POacal * So, Seller is I’m an Apple fanboy. Even if price Seller is not Price TAKER (2) 10% I'll not shift to Samsung. on brandPerfect Competition (quot ufcatftcn) BRS GR SRS Ll eS *So, even little change in price — will shift ALL buyers to. y) another seller. A - Buyer is the PRICE MAKER, * Seller is theERT) Sete Ol On COte Market: where buyer and seller strike a deal. Doesn't need geographical location. Can be done Online / phoney) ic eeeeter ster Cu Ce) EG. rues) Doc) Ty —_—mu Ce MUR CE LMU Tac M mae Output (50gm) (some wastage)“Production function” is the relationship between input & output pe ite 4 Production function > depends on technology. when technology changed 6. = production will change. Output (50gm) (some wastage) Why is it like this? Ans. To pass MCQ, accept and memorize.Cost function: relationship between Petherton * To produce f output entrepreneu has to engage feat x Land F oO 2 more f factors of production . EZR 5 f (Land, Labour, Capital) / E * so, cost function depends on 5 io level of output. . a> . re Capital Factors of production Ans. To pass MCQ, accept and memorize.ety em AL) AO a CUCKOO Bec acd] Social Cost + Factories emit smoke — local residents fall ill, their cars / clothes require more frequent washing. '* These ‘social cost’, not recorded in company’s balance sheet. Private Cost * = % Amount a factory owner has to spend to produce goods. * Recorded in company's balance sheet.Production — Types of Cost Real Cost (areafaa arta) * A producer takes a lots of pain, stress, sacrifices to establish business. * This is ‘real cost’, CANNOT be measured in = @ Money Cost (fg arta) * Wage to labour, rent for building, * interest on borrowed funds etc. * are paid in monetary units and hence called money costProduction — Types of Cost It) (alae a + Farmer's cost of buying fertilizer, insecticide etc from market Ty ea Een nea * Farmer's cost of self provided inputs like farmer's own family’s. labour, own land, BS Raat Sea OAce Production — pricing and accounting Shadow price * True value without distortion e.g. fertilizer's or LPG cylinder’s original price without subsidies and taxes. Green accounting & green GDP * Deduct the harm to environment. er minus 100 worth pollution *=900 GDP only.Normal profit ‘Normal profit’ is producer's minimum OHI ROLE ROIS oe So long as he gets this minimum, he will continue to do this business, ELSE he will shift to another Dee CE CCRC UCC CCS -ul So, to remain in a business, he must recover his SCH Me ee Himes ee Cae Monopoly & cartels have ‘super-normal’ profits. Related terms: break even point @supply curve.Cre ese LCT | eT Ree a we ° Edu Doubt? Askthrough N LC eS) I Aes a —_—SCR mera Prime cost, direct (cael) (oemesid as Cre OBR Cal OR CI TO CR CGE CGI RCE RCAC IIT y Will change with volume of output: 1. Raw material (10 kg vs 100 kg) Paceline | RAS Cay Achy CRA coedBOR m CLC MWR I\eerea cr Supplementary cost, Overhead cost, unavoidable cost Variable 1. Property tax, rent, Whether you produce 10 Gutka PA Ce pouches or 1000 Gutka pouches, it NE CCR OM UUM ee (eta) remains fixed. CR 10 feseit qeen aasit at 100 frei, 5. Software License / royalty fee a ad ae aaermeRe Ay TORS IB TU) oR Rae cuel| Total Fixed Cost (100)= straight line slope ey aN ae PA er Pre moe ON CULL g uray ae) Em ACH) d Fixed CostAvg Fixed Cost = Total fixed cost divided by Total units produced. aeons Total Fixed Cost (100) If 1 units 100/1= = 100 If 3 units 100/3 =% 33 Avg. fixed cost = rectangular hyperbola curveMCQ based on UPSC-CDS-2013-1 Which one among the following is/are not fixed cost to a manufacturing firm in the short run? SRS SRR cc PU uO LCE OIC IESE SC IMU CIR Seo RC Ua ME ee B oc eel OUST els (os rye 1) AL Ry Coney aR LC Ry DO RUT nC Rais) Pox Ee os EeBOR m CLC MWR I\eerea cr Supplementary cost, Overhead cost, unavoidable cost Variable 1. Property tax, rent, Whether you produce 10 Gutka PA Ce pouches or 1000 Gutka pouches, it NE CCR OM UUM ee (eta) remains fixed. CR 10 feseit qeen aasit at 100 frei, 5. Software License / royalty fee a ad ae aaermMCQ based on UPSC-CDS-2013-1 POCO UU eC eae Tu Une Lid SRST UP OC cee ue Uc eee en te) OTS Ca Pe On meer me eed 3. Cost of energy and raw materials = more quantity, more cost Pay ee Carre) eC CUS RCT eco B CO oll (CECE) RR ORR ERE CSI g D. Noneofthem arefixedcosts |* Ifa cost changes with (4) in quantity produced eee e Rinne a a CCl ea a 100% Surety 4CSCS CHC Ce CCRC CRG RECO roe SUR UEC REST CR IDC Rees rir ne) continues to decline — Production starts to ed become ‘More PROFITABLE’. Hf1units 100/1= 100 MTT MCR N UMUC R ITU N Co : managerial, operational, energy efficiency = H3units — 100/3=33 wastage of raw ears COR Cea ELT aC Se Kashmir to cultivate KESAR): variable costs!. Result: pital, rea Road Seca ‘ RR uAGUS COR) 7Beyond a point, if firm grows bigger in size — production starts to become ‘LESS PROFITABLE’ co eC One e meee RCAC Lt ied 100 lakh Gutka packets but Addicts in local Gujarati market are finite. They've to send cargo to Maharashtra’s market = added Ttransportation cost + have to hire new Tsalesmen to tie up with their pan-parlours etc. Law of variable proportion: Stage-I: increasing return, SET Ca MCSA meses] Colston COUPCC RH MAL MU ORSe aI What exactly is the law? © Notimp. Just the word association 10% (4) in input he How much % (3) *Capital in output * Raw material Dee COR ro Om nT TO CCE CE Rogie i ied74.2.3 @ Types of Incomes (strrepft & We) Fixed income Income which remains stable over a period of time, e.g. wages. Fluctuating Income which is not fixed. e.g. profit from Bitcoin investment income Es Money income | The amount of money earned, e.g. Rs. 15000 per month ee It is the purchasing power of money. e.g, how many kilos of onions can you buy Real income | «om your salary? (Ref. PillardE: Inflation) Contractual | This income is paid as per the terms and conditions of contract, e.g. rent, wages. income Residual | Income left after making payments to all factors of production (e.g, land's rent, income __| labour's wages, interest to loan provider). Also known as profit Earned income Income obtained after participating in the productive activity, e.g. rent, wages, interest, profit. Unearned income Income without indulging in any productive activity, e.g. lottery prizes, inheritance from dead relative. Fara fa fer my - ited ar gar, geet fretE220 min reading To be regarded as ‘wealth’, a commodity must have FOUR characteristics : (40 min video Utility ‘A commodity must have the capacity to satisfy human wants, e.g. Lar tatcan— produce crops. Scarcity | It shouldnot be infinite/extremely large supply / freely available to everyone. e.g. sea water is not wealth, Transferability | A commodity should be transferable from person to person. e.g, vehicle, jewellery, patent rights, land ownership ete. Externality | A commodity has be external to human body, e.g. gold, land etc. ical strength / health is not wealth in economics. ay > But, Beauty or voice or ph because it is internal to body.Microeconomics: we'll solve some PYQs from what we learned tonight USCC] ats Ponta Merce ae od (ee eI Se