ECONOMY:-

We have several wishes. But all the wishes cannot be fulfilled due to the
matter of economy. Economy is the factor which shows us that whether our wishes are to
be fulfilled at that particular time period or not. Hence economy allocates the limited
resources such that the wishes of a particular area or an individual are
maximized.
Society is a broader a concept & economy deals with a particular society.
Economy can change the life style of the society.
Economy gives the solution to some problems. Such as
-how to produce
-how to consume
-how to distribute
Why economy is required for Engineers:-
Engineers have to perform all their activity in particular range of
economy. Basically they deal with the production, maintenance, management & some
times with the marketing activity. The performance of all the above mentioned activities
deals with the economy. Hence it is very much essential to the engineers to know about
economy.
What is Managerial economy:-
It deals with the application theoretical concept of economy &
methodology in the practical field of business administration.
They deal with the firm in which they are working. They do not take
interest in the economy directly country or area. But they understand the economy of the
region where the firm is established in order to adjust in the environment.

MARKET:-
The platform where the goods & services are purchased or sold is
called market.
DEMAND:-
The effective desired of an individual or a household for the goods
& services having ability to pay, willingness to pay is called demand. Demand deals
with the following three objects. Such as
-effective desire
-ability to pay
-willingness to pay
Types of Demand:-
-Individual demand
It is the demand of an individual.
E.g. demand for a cigarette, battle leaf, wine etc.
-Household demand
It is the demand of a household.
E.g. demand for a house, washing m/c, freezer etc.
-Market demand:-
It is the integration of all the above mentioned demand is called market
demand.
Determinants of demand / Factors Affecting the Demand:-
- Price of the commodity
- Income of the individual
- Price of the related products
- Taste & preferences
- Expected action in the future
- Expected income of the individual in future
- Population
- Demography
- Advertisements of a commodity
Price of the commodity:-
Generally the consumers prefer to buy a low price product which is
suitable for them. When the price of the product increases the demand of that product
decreases as the purchasing capacity of the consumer decreases. Similarly when the price
of the product decreases the demand of that product increases due to increase in the
purchasing capability of the consumer.
Income of the individual:-
The quantity demand of a product depends on the income of the
consumer. If the income of the consumer increases the demand of the product also
increases due to the increase in the purchasing capability of the consumer. But the
demand of some commodities like fruits, vegetables etc increases up to certain level with
increase in income. After a particular point the demand of these products remains constant.
Some products as e.g. inferior goods, their demand decreases with the further increase in
the income from a particular value.
figure 01:- INFLUENCE OF QUANTITY DEMAND BY INCOME OF INDIVIDUAL

A- common /normal good

B- foods like fruits, vegetables
C- inferior goods
Price of the related products:-
Related products means that those may be perfect substitute of each
other or the complement of each other.
If the products are perfect substitute of each other (tea & coffee, apple &
pears) & price of one product increases ultimately demand of the other one decrease.
If the goods are complement to each other (petrol & car, pen & ink) the
increase price of one will affect the demand of other product (decrease) as they are
complement of each other.
Figure 02:- substitute products.
Figure 03:- complement products.

Test & preferences:-

The quantity demand of the product always depends on the choice of the
consumer. Moreover it is a time factor as the choice of the consumer always changes from
time to time. The demand of the out dated fashion goods always is always less. E.g.
demand of clothes. The new fashion clothes have always a great demand in the market
where as the demand of the old fashion clothes face a less demand in the market.
Future expectation:-
The demand of the commodity always depends on the future expectation
of the consumer.
His future expectation can be classified into two categories. Such as – future income
_future price of the
product
.Future income:-
When there is a possibility of increase in income in future the purchasing
capacity of the consumer increases. As a result the quantity demand of the product also
increases.
Increase salary, switched over from one organization to another etc are the expectation of
increase in price.
.Future price of the commodity:-
When there is any possibility of decrease in price of the product in future,
the quantity demand of that product decreases at that particular period of time as the
consumers wait for that decrease in price of that product.
E.g. electronics goods
Advertisement:-
This is a very expensive method of the business. Excessive advertisement
of the product may have some influence on the consumer & hence the quantity demand of
the product may increase.
Population:-
Population of a particular area affects the demand. If the population of a
concern area is more, the demands of the commodities increase to a great extent. In the
same manner if the population of the same area is less in number, the demands of the
commodities decreases.
Demography:-
The study of composition of the population considering a particular factor
is called demography. The population is distributed as follows.
----------- According to age
--------------------- Children demand
Demand for a toys, pen, pencil, etc.
--------------------- aged demand
Demand for chawanpras, water heater, etc.
----------- According to income
---------------------- Poor demand
Demand for very inferior goods.
---------------------- Rich demand
Demand for the luxury products.

Demand Function:-
The relationship between demand & their determinants is called demand
function. When this relation exists with any individual, it is called individual demand
function. When this relation exists with the market, it is called market demand function.
Individual demand function:-
This is the relation between the individual & its determinants are called
individual demand function.
It is denoted by Qdx.
Qdx= (PX, Y, P1…..Pn-1, T, A, Ep, Ey, U)
Where Px= Price of the commodity.
Y= Income of the consumer.
 T= Test of the consumer.
A= Advertisement of the commodity.
Ep= Exception of the future price.
Ex= Exception of the future income.
U= Other factors which are not considered.
P1…….Pn-1= Price of the related goods in the market.

Market demand function:-

q.dx= f (Px,Py,Y,Pz,Eb,Ey,T,U,P,D)
where P= population
D= demography
Px= Price of the commodity.
Y= Income of the consumer.
T= Test of the consumer.
Ey= Exception of the future price.
Ex= Exception of the future income.
U= Other factors which are not considered.

Law of Demand:--
Law of demand states that, “with the other factors remaining
constant, higher the price lower the demand & vice versa“.
A consumer always prefers to buy a product with the cheaper price. When
the price of a commodity decreases, the purchasing ability of his increases. Hence he is
inspired to buy more of that product. This ultimately increases the demand of that product.
Again when a product becomes cheaper the consumer wishes to buy more of the other
related products due to increase in his income. Hence the quantity demand of the relatively
costlier product also increases.
 FIGURE-04 DEMAND CURVE

Why do demand curve slope down:-

1- When the price of the good decreases, consumer purchase more of it. Ultimately
the demand of those good increases. Some new consumers enter into the market.
2- When a relatively costlier product comes to the market with the decrease in price,
it attributes the consume income level. The consumer buys more of it. Again he has
the choice to go for the other goods as his saving level has increased.
3- When the price of a commodity decreases & the price of its relative product
remains unchanged, the demand of the previous product increases. Reverse thing
will happen when the price of the product will increase.
Types of demand:-
Derived demand:-
The demand for those commodities which helps in further production of the
other goods & commodities is called derived demand.
E.x. biscuis- the demand for the raw material, machineries etc help in production
are called as derived demand.
Autonomous demand:-
 The demand for those commodities which is used in direct consumption is
called as autonomous demand.
E.x. wooden furniture
Demand for the consumer goods & producers good:-
Any product demanded for the consumption purpose is classified under
the demand for the consumer good.
e.x. vegetables
Any product demanded for the consumption purpose is classified under the
demand for the producers good.
e.x raw material
consumer goods & producers goods are again divided to
1-durable goods
2-non durable goods
Goods which are used for the longer & repetitive period of the time is called as
durable good.
e.x. cars, refrigerator, machinery products etc.
Goods which are used for the shorter & non repetitive period of the time is
called as non-durable good.
e.x. raw materials in food product.
Firm demand:-
A single company is denoted as firm.
A demand by a firm is called as firm demand.
Industry demand:-
A demand by all the firms which are low substitute to other firms are
called as industry demand.