# Introduction to Economics and Demand: Meaning of Economics

## Economics

• Economics: A Queen of social sciences
• Economics = ‘Oikos’ + ‘Nomos’ (Greek words)
• ‘Oikos’ = ‘House’
• ‘Nomos’ = ‘Management’
• According to J. S. Mill , Economics is “The practical science of production and distribution of wealth.”

## Meaning of Economics

• It is the study of how people produce and spend income.
• It talks about ‘Economic activities’ and ‘Economic problems’ .
• It is the study of logical choice between scarce resources and unlimited wants .
• It deals with the central problems of an economy such as , What to produce? , How to produce? and for Whom to produce? .
• Economics is the social science that is concerned with production , distribution and consumption of goods and services.

## Demand

• Desire
• Willingness to buy at a given price and at a given time
• Demand is related to price.
• The relation between price and demand is inverse, when the price goes up of a particular commodity , its demand falls and vice-versa.
• A man may be willing to get a thing, but he is not able to pay the price , it is not the demand in the economic sense.
• But in exceptional cases the two variables may move in the same direction. Example: Griffin goods

## Determinants of Demand

• Income
• Price
• Taste and preferences of consumers
• Supply
• Price of other goods

## Demand Function

Demand function states the relationship between demand for a product (dependent variables) and its various determinants (the independent variables) affecting it.

A demand function may be expressed as follows:

• f (, M, , , T, A)
• Where, is the quantity demanded of a product X
• is price of a commodity
• M is the money income of the consumer
• is the price of its substitutes
• is the price of its complementary goods
• T is consumers tastes and preferences

## Law of Demand

• The law states the nature of relationship between the quantity demanded of a product and its price.
• According to law of demand , other factors being constant (cetris peribus) , if the price of commodity falls , the quantity demanded of it will rise and if the price of commodity rises , its quantity demanded will decline.
• Thus, there is inverse relationship between price and quantity demanded.

## Assumptions to Law of Demand

• Income of people remain unchanged
• Tastes and habits of people remain unchanged
• Price of substitute and complementary goods remain unchanged
• There is no expectation of future change in price of commodity.

## Difference between Demand and Quantity Demanded

 Demand Quantity demanded Demand lists out quantities that would be purchased at various prices. Quantity demanded is the actual amount of goods desired at a certain price. Change in demand -by factors other than price Change in quantity demanded - by price only and other factors remaining constant. Change in demand is shown by increase or decrease in demand Change in quantity demanded is shown by expansion or contraction in demand.

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