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ECONOMICS XII CLASS

ECONOMICS XII CLASS. CLASS XII : TOPICS. PRODUCTION POSSIBILITY CURVE. CONCEPT OF DEMAND. SHIFT IN DEMAND CURVE AND MOVEMENT ALONG THE DEMAND CURVE. CONCEPT OF SUPPLY. SHIFT IN SUPPLY CURVE AND MOVEMENT ALONG THE SUPPLY CURVE. EQUILIBRIUM PRICE. PRODUCTION POSSIBILITY CURVE. (PPC).

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ECONOMICS XII CLASS

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  1. ECONOMICS XII CLASS

  2. CLASS XII : TOPICS PRODUCTION POSSIBILITY CURVE. CONCEPT OF DEMAND. SHIFT IN DEMAND CURVE AND MOVEMENT ALONG THE DEMAND CURVE. CONCEPT OF SUPPLY. SHIFT IN SUPPLY CURVE AND MOVEMENT ALONG THE SUPPLY CURVE. EQUILIBRIUM PRICE.

  3. PRODUCTION POSSIBILITY CURVE. (PPC)

  4. COTENTS DEFINITION OF PRODUCTION POSSIBILITY CURVE. PRODUCTION POSSIBILITY SCHUDLE. PRODUCTION POSSIBILITY CURVE. SHIFT IN PRODUCTION POSSIBILITY CURVE. CURVE SHOWING UNDER UTILIZATION OF RESOURCES AND FULL UTILIZATION OF RESOURCES.

  5. Objectives • To understand meaning of PPC. • To understand PPC schedule. • To understand PPC. • To understand why it is concave to the origin. • To understand that any point inside it shows under utilization of resources , point on it shows full utilization of resources. • To understand central problems.

  6. PRODUCTION POSSIBILITY CURVE • Production possibility curve is that curve which represents the maximum amount of a pair of goods or services that can both be produced with an economy’s given resources and technique, assuming that all resources are fully employed.

  7. Assumptions of PPC (a) Fixed quantity of factor of production of production. (b) Resources are fully and efficiently utilized. (c) Technology of production remains constant. (d) Assumption of two goods.

  8. PRODUCTION POSSIBILITY SCHUDLE

  9. PRODUCTION POSSIBILITY CURVE P A1 A2 A3 A4 A GOOD A5 O B1 B2 B3 B4 B5 P B GOOD

  10. Two Basic Properties of PPC • (1)Production Possibility Curve Slopes Downwards: Production possibility curve slopes downwards from left to right. It is because in a situation of fuller utilization of the given resources, production of both the goods can not be increased. More of good-Can be produced only with less of good-Y. • (2) 1)Production Possibility Curve is concave to the point of origin; It is because to produce each additional unit of good-X, more and more unit of good-Y will have to be sacrificed than before. Opportunity cost of producing every additional unit of good –X tends to increase in terms of loss of production of good-Y.In other words, production will obey the Law of Increasing opportunity cost

  11. P1 GROWTH OF RESOURCES P A GOOD Initial Resources P o P1 B GOOD

  12. Full Utilization of resources Unattainable combination of output . P W . Y . S . . . . A GOOD Z E . Under utilization of resources P O B GOOD

  13. OPPORTUNITY COST • Opportunity Cost:- Opportunity Cost refers to value of a factor in its next best (or second best) alternative use. Y A Use-1 value of output Rs.6000 O B X Use-2 value of output Rs. 5000 Opportunity cost of employing resources in use -1=loss of out put in next best alternative use of the given resources which is Rs. 5000 in use -2

  14. Evaluation Define P.P.C. ? What does slope of P.P.C show ? What does the point inside the P.P.C. show ? What does the shifting of P.P.C show ? Can you show the central problems through the P.P.C ?

  15. DEMAND Meaning –the quantity of a commodity or service that a consumer would buy at a given price and at a given time .

  16. Contents of demand Desire for a commodity. Ability to pay. Readiness to spend. Specific time. Specific place. Specific price.

  17. FACTORS AFFECTING DEMAND Price of the commodity. Income of the consumer. Price of related goods. Tastes and preferences. Future expectations.

  18. LAW OF DEMAND If other things remaining the same, when the price of a commodity increases, its demand falls and when the price falls, its demand increases.

  19. Assumptions of law of Demand (1)Income of the consumer remains constant. (2)There is no change in the taste and preference of the consumer. (3)No change in price of the related good. (4)The commodities are normal. (5)There is no expectations of change in price in near future. (6)No new substitute of the commodity are available. (7)No change in the distribution of income and wealth. (8)Other relevant factors like size and composition of population, seasonal and climate factors, economic condition of the country etc. remain unchanged.

  20. RELATION OF PRICE WITH DEMAND PRICES (Rs.) DEMAND (Qt.) 1 5 2 4 3 3 4 2 5 1

  21. Y D 5 Price 1 D O X 1 5 Quantity

  22. DIFFERENCE Base of difference Sr.no Change in Quantity Demand Change in Demand Change in Quantity demanded refers to increase or decrease In quantity purchased of a commodity in response to change in other determinants of demand, other than price of the same commodity. Shifting of the Demand curve (1)Increase in Demand (2)Decrease in Demand Change in Quantity demanded refers to increase or decrease In quantity purchased of a commodity in response to decrease or increase in its price other than its determinants. Movements along the Demand curve (1)Extension of Demand (2)Contraction of Demand Definition 1 2 Alternative Name

  23. This is caused only by change in the price of concerned commodity Increase in price of the commodity is the only cause This is caused by change in determinants, other than price of the concerned commodity Several causes: Decrease in income, decrease in price of substitute good, increase in price of complementary good, Price (x) Quantity (Units) 10 30 10 20 Difference between Contraction and Decrease in Demand Price(Rs.) Quantity (Units) Description 1 5 p Q.D. D

  24. Contraction of demand D P1 N Price M P D Q1 Q O Quantity

  25. Decrease in demand D Y D1 E1 E P Price D D1 x Q1 Q O Quantity

  26. Extension of demand P Y D K Price P1 P1 P1 P1 P1 L D Q1 Q O Quantity

  27. Increase in demand D1 PRICE D Y p E1 E D1 D O X QUANTITY Q Q1

  28. VERY SHORT ANSWER TYPE Q .1 Define demand ? Q .2 Define supply ? Q .3 Define demand function ? Q .4 Define supply function ? Q. 5 what do you understand by demand schedule ? Q.6 what do you understand by supply schedule ? Q 7 Explain the law of demand ? Q 8 what are the factors affecting demand ? Q 9 what are the assumptions of law of demand ? Q 10 what are the exceptions to the law of demand ? Questions

  29. CONCEPT OF SUPPLY

  30. SUPPLY OF GOODS

  31. DEFINITION OF SUPPLY • The supply of goods is the quantity offered for sale in a given market at a given time at various prices.

  32. Law of Supply • The law of supply states that other things remaining constant, the higher the price the greater the quantity supplied or the lower the price the smaller the quantity supplied.

  33. FACTORS AFFECTING SUPPLY Price Of Commodity.*Price Of Factors Of Production.*Productivity Of Factors.*Technology.*Numbers Of Firms.*Policy Of Govt.*Aim Of Firms.

  34. TYPES OF SUPPLY SCHEDULE • (1) Individual Supply Schedule. • (2) Market Supply Schedule.

  35. The table relating to price and quantity Supplied is called the supply schedule. SUPPLY SCHEDULE

  36. Other things being are equal, when quantity supplied of a commodity increases due to rise in its price it is called extension. EXTENSION OF SUPPLY

  37. DIFFERENCE BETWEEN CHANGE IN QUANTITY SUPPLIED AND CHANGE IN SUPPLY. Change in quantity Supplied Due to change in price. Movement along the supply curve. Change in supply Due to change in other factors. Shift in supply curve.

  38. EXTENSION OF SUPPLY

  39. EXTENSION OF SUPPLY EXTENSION OF SUPPLY

  40. Other things being equal, when quantity supplied of a commodity decreases due to fall in its price, it is called contraction of supply. CONTRACTION OF SUPPLY

  41. Contraction of Supply

  42. INCREASE IN SUPPLY

  43. INCREASE IN SUPPLY • More supply at same price or same supply at less price is called increase in supply.

  44. Increase in Supply

  45. DECREASE IN SUPPLY Less supply at same price and same supply at more price is called decrease supply.

  46. DECREASE IN SUPPLY

  47. Evaluation What do you mean by supply ? Define the law of supply ? Name any four factors effecting the supply of a commodity. Define the expansion of supply. What do you mean by contraction of supply ?

  48. Equilibrium Price

  49. Equilibrium Price Will be Shown by the Diagram Effect of Change in demand on Equilibrium Price- When supply is Constant ,Perfectly Elastic and Perfectly Inelastic Effect of Change in Supply on Equilibrium Price- When Demand is Constant ,Perfectly Elastic and Perfectly Inelastic Effect of Simultaneous Change in Demand and Supply All the Effects Mentioned Above Will be Shown by the Diagrams Index

  50. HERE ARE SOME PICTURES OF HOUSEHOLD COMMODITIES Rs. 8,000/- Rs. 5/- Rs. 20,000/-

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