BUILDING ECONOMICS

ASSIGNMENT
ON
CONCEPTS OF ECONOMICS

SUBMITTED BYSHASHANK GARG

B. ARCH (AR)
IX SEM.

ECONOMICS: ECONOMICS IS THE SOCIAL SCIENCE THAT ANALYZES

THE PRODUCTION, DISTRIBUTION, AND CONSUMPTION OF GOODS AND SERVICES.

Utility: UTILITY IS A MEASURE OF RELATIVE SATISFACTION.

UTILITY IS A TERM TO DESCRIBE THE MEASUREMENT OF "USEFUL-NESS" THAT A
CONSUMER OBTAINS FROM ANY GOOD.
UTILITY MAY MEASURE HOW MUCH ONE ENJOYS A MOVIE, OR THE SENSE OF
SECURITY ONE GETS FROM BUYING A DEADBOLT. SOME EXAMPLES INCLUDE THE
UTILITY FROM EATING AN APPLE, FROM LIVING IN A CERTAIN HOUSE, FROM VOTING
FOR A SPECIFIC CANDIDATE.
IT IS DEFINED AS THE POWER IN THE ARTICLE OR SERVICE TO SATISFY A
WANT.
IT DEPENDS UPON THE INTENSITY FOR AN INDIVIDUAL; THE DEGREE OF
WANT.
IT DECLINES AS WE GET MORE UNITS OF COMMODITY.
THERE ARE 3 TYPES OF UTILITIES:

AVERAGE UTILITIES.
MARGINAL UTILITIES.
TOTAL UTILITIES.

Law of Diminishing Marginal Utility:

THE MARGINAL UTILITY OF A GOOD OR SERVICE IS THE UTILITY GAINED (OR

LOST) FROM AN INCREASE (OR DECREASE) IN THE CONSUMPTION OF THAT
GOOD OR SERVICE.
ECONOMISTS SOMETIMES SPEAK OF A LAW OF DIMINISHING MARGINAL
UTILITY, MEANING THAT THE FIRST UNIT OF CONSUMPTION OF A GOOD OR
SERVICE YIELDS MORE UTILITY THAN THE SECOND AND SUBSEQUENT UNITS.

Want Vs Need:

THE HUMAN MOTIVES THAT INDUCE THE BUSINESS AND ECONOMIC

ACTIVITIES WHICH PRODUCE THE DESIRED GOODS AND SERVICES, OR
THE MEANS TO ACQUIRE THEM.
DIFFERENT FROM NEED, YOU NEED OXYGEN, BUT YOU WANT A HOT FUDGE
SUNDAE. SATISFACTION IS ACHIEVED BY FULFILLING WANTS. THE WORD
" NEED " IS DEFINED AS LACK OF THE MEANS OF SUBSISTENCE.
DIRE NEEDS OR WANTS ARE ESSENTIAL PART OF LIFE. WANT IS THE MOTHER
OF ALL INVENTIONS. WHEN DESIRE BECOMES MORE EFFECTIVE AND ONE IS
ABLE TO FULFILL IT, IT GETS CONVERTED TO WANT.

CRITERIA FOR WANT:i)

ii)

DESIRES
REASONS TO FULFILL THE DESIRE

iii)

WILLINGNESS TO SPEND ON THAT DESIRE

CLASSIFICATION OF WANT:1) NECESSITIES DAILY NEEDS

(a) FOR EXISTENCE FOOD, SHELTER & CLOTHING
(b)FOR EFFICIENCY BETTER BALANCED DIET , FOOD,
CLOTHING, FURNITURE, EDUCATION FOR CHILDREN, MEDICAL
FACILITIES, ETC
(c) FOR CONVENTIONAL NECESSITY- SOCIAL OBLIGATIONS,
PERFORMING VARIOUS RITES, EVENTS LIKE BIRTH , DEATH,
MARRIAGE ETC
2) COMFORTS
TO LIVE IN AN ENVIRONMENT WHICH ENHANCES
PRODUCTIVITY & EFFICIENCY IN AN HEALTHY ENVIRONMENT, EG ; GOOD
VENTILATED HOME , HAVING A VEHICLE, ETC, OTHER GADGETS &
CONVENIENCES
3) LUXURY LEAD A LUXURIOUS LIFE
CHARACTERISTICS OF WANT :1)
2)
3)
4)
5)

UNLIMITED
ONE BY ONE FULFILLMENT AS PER PRIORITIES
RECUR AGAIN & AGAIN
LISTED IN ORDER OF PRIORITY
IMMEDIATE OR PRESENT WANTS ARE MORE IMPORTANT THAN FUTURE
WANT
6) SOME WANTS ARE COMPLIMENTARY
7) KNOWLEDGE INCREASES WANTS
8) WANTS MAYBE A MATTER OF HABIT

Cost and Price: COST IS THE VALUE OF MONEY THAT HAS BEEN USED UP TO PRODUCE SOMETHING,
AND HENCE IS NOT AVAILABLE FOR USE ANYMORE.
PRICE IS THE QUANTITY OF PAYMENT OR COMPENSATION GIVEN BY ONE PARTY TO
ANOTHER IN RETURN FOR GOODS OR SERVICES.
PRICE IS COMMONLY CONFUSED WITH THE NOTION OF COST OF PRODUCTION
THOUGH, THESE ARE DIFFERENT CONCEPTS.
PRICE IS WHAT A BUYER PAYS TO ACQUIRE PRODUCTS FROM A SELLER.
COST OF PRODUCTION CONCERNS THE SELLERS INVESTMENT (E.G.,
MANUFACTURING EXPENSE) IN THE PRODUCT BEING EXCHANGED WITH A BUYER.

Value:

AN ECONOMIC VALUE IS THE WORTH OF A GOOD OR SERVICE AS

DETERMINED BY THE MARKET.

THE VALUE OF AN ASSET DERIVING FROM ITS ABILITY TO GENERATE INCOME.

E.G THE DIAMOND WATER PARADOX.

DETERMINANTS OF HOUSEHOLD DEMAND:- A HOUSEHOLDS DECISION ABOUT

THE QUANTITY OF A PARTICULAR OUTPUT TO DEMAND DEPENDS ON:

THE
THE
THE
THE
THE
THE

PRICE OF THE PRODUCT IN QUESTION.

INCOME AVAILABLE TO THE HOUSEHOLD.
HOUSEHOLDS AMOUNT OF ACCUMULATED WEALTH.
PRICES OF RELATED PRODUCTS AVAILABLE TO THE HOUSEHOLD.
HOUSEHOLDS TASTES AND PREFERENCES.
HOUSEHOLDS EXPECTATIONS ABOUT FUTURE INCOME, WEALTH, AND PRICES.

Quantity Demanded: QUANTITY DEMANDED IS THE AMOUNT (NUMBER OF UNITS) OF A PRODUCT THAT
A HOUSEHOLD WOULD BUY IN A GIVEN TIME PERIOD IF IT COULD BUY ALL IT
WANTED AT THE CURRENT MARKET PRICE.

Income and Wealth: INCOME IS THE SUM OF ALL HOUSEHOLDS WAGES, SALARIES, PROFITS, INTEREST
PAYMENTS, RENTS, AND OTHER FORMS OF EARNINGS IN A GIVEN PERIOD OF TIME.
IT IS A FLOW MEASURE.
WEALTH, OR NET WORTH, IS THE TOTAL VALUE OF WHAT A HOUSEHOLD OWNS
MINUS WHAT IT OWES. IT IS A STOCK MEASURE.

RELATED GOODS AND SERVICES: NORMAL GOODS ARE GOODS FOR WHICH DEMAND GOES UP WHEN INCOME IS
HIGHER AND FOR WHICH DEMAND GOES DOWN WHEN INCOME IS LOWER.
INFERIOR GOODS ARE GOODS FOR WHICH DEMAND FALLS WHEN INCOME RISES.
SUBSTITUTES ARE GOODS THAT CAN SERVE AS REPLACEMENTS FOR ONE
ANOTHER; WHEN THE PRICE OF ONE INCREASES, DEMAND FOR THE OTHER GOES
UP. PERFECT SUBSTITUTES ARE IDENTICAL PRODUCTS.
COMPLEMENTS ARE GOODS THAT GO TOGETHER; A DECREASE IN THE PRICE OF
ONE RESULTS IN AN INCREASE IN DEMAND FOR THE OTHER, AND VICE VERSA.

The Law of Supply: THE LAW OF SUPPLY STATES THAT THERE IS A POSITIVE RELATIONSHIP BETWEEN
PRICE AND QUANTITY OF A GOOD SUPPLIED.
THIS MEANS THAT SUPPLY CURVES TYPICALLY HAVE A POSITIVE SLOPE.