ASSIGNMENT

On Summary of all topics from the final syllabus

Course Title - Microeconomics
Course Code - ECN125

Submitted By: Mushrafi MD Eram

ID: 242 367 025
Batch: 242
Department: BBA

Submitted To: Saima Ahmed

Lecturer, Dept. of Business Administration
Demand
Demand is a principle of economics that captures the consumer's desire to buy the product or service.
The demand is calculated as the price the consumers are willing to pay for the product or service.
Desire, willingness and ability to buy a service or good are the three requirements for there to be
demand.

There are various factors that drive demand, including cost, income, preference and more. These

factors also affect consumers’ purchase decisions. Here are the fundamental determinants of

demand:

1. Cost of a Good or Service

2. Income of Buyers

3. Cost of Related Goods or Services. Cost of Related Goods or Services

4. Tastes or Preferences

5. Expectations

The law of demand states that other factors being constant, price and quantity demand of any good

and service are inversely related to each other. When the price of a product increases, the demand

for the same product will fall.

Demand Chart

Price of the Product (Taka) Demand of the Product (Unit)

2 8
4 8
6 6
8 4
10 2

The law of demand applies to most of our everyday products. But, it’s not for all products.

There are specific cases where it doesn’t apply. Thus, an increase in price does not always lead to

a decrease in the quantity demanded. Vice versa, a decrease in price does not always increase the

quantity demanded.
Market
In microeconomics, a market is a place where buyers and sellers exchange goods and services, and
where the value of those goods and services is established

• Definition

A market is a place where buyers and sellers interact to exchange goods and services. Markets can be
physical, like a retail store, or virtual, like an online retailer

• Market structure

There are different types of market structures, including monopolies, oligopolies, and monopolistic
competition.

• Market classification

Markets can be classified in many ways, including by geographic location, product market, factor
market, time, and regulation.

• Market economy

Most countries have primarily market economies, but government policies can influence them.
Market Supply and Demand
In microeconomics, supply and demand is an economic model that describes how the price and
quantity of goods and services in a market are determined. Supply and demand are both important
economic forces that influence each other and impact the economy:

• Supply

The amount of a good or service that is available in the market at a given price

• Demand

The amount of a good or service that consumers want to buy at a given price

Supply and demand are represented on a graph, where the x-axis shows quantity and the y-axis shows
price. The point where the supply and demand curves intersect is the equilibrium price, where the
market forces of supply and demand are balanced

Factors that can shift the supply curve include:

• Input prices

• Number of suppliers

• Expectations

• Price of alternative goods

• Technology

• Taxes
Equilibrium
In microeconomics, equilibrium is the point at which supply and demand for a product or service are
equal, or in balance. It's represented by the intersection of the supply and demand curves on a price-
quantity graph.

Equilibrium is important because it means that prices are stable. When there's an excess of supply,
prices fall, which increases demand. When there's a shortage, prices rise, which decreases demand.

Equilibrium can be encountered in the following models: The supply and demand model for perfectly
competitive markets, The monopolist's market model, and Game theory models.

Equilibrium can refer to the balance of aggregate supply and aggregate demand. It can also refer to the
equilibrium of the money supply, interest rates, inflation rates, and production.
Consumer Surplus and Producer Surplus
consumer surplus and producer surplus are economic benefits that consumers and producers receive
in a financial transaction:

• Consumer surplus

The difference between the maximum price a consumer is willing to pay for a product and the actual
price they pay. It's the benefit consumers receive when they pay less than they were willing to.

• Producer surplus

The difference between the actual price a producer receives for a product and the minimum price they
were willing to accept. It's the benefit producers receive when they sell for more than they were willing
to.

The sum of consumer and producer surplus is called total welfare, total surplus, or community
surplus. Markets are most efficient when consumer and producer surpluses are at their maximum.
Factors of Production
Factors of production are the inputs used to produce goods and services, and are considered the
building blocks of an economy:

• Land

Includes all natural resources, such as water, forests, minerals, and physical land. The quality and
availability of land can impact an economy's productivity.

• Labor

The effort put in to produce a good or service, which can be manual or mental.

• Capital

Refers to the produced instruments of production, such as factories, equipment, raw materials, finished
goods, and trade facilities.

• Entrepreneurship

A factor of production.

The factors of production work together and individually to produce a good or service. They are
important because they help identify how societies create money and how economies operate.
Price Elasticity, Supply Elasticity, Demand
Elasticity, and Income Elasticity
price elasticity, supply elasticity, demand elasticity, and income elasticity are all measures of how
responsive a variable is to a change in another variable

• Price elasticity of demand

Measures how the quantity demanded of a good or service changes in response to a change in price.

• Income elasticity of demand

Measures how the quantity demanded of a good or service changes in response to a change in consumer
income.

• Cross-price elasticity of demand

Measures how the quantity demanded of one good changes in response to a change in the price of
another good.

Elasticity can be categorized as perfectly elastic, elastic, perfectly inelastic, inelastic, or unitary. Elastic
means the elasticity is greater than one, indicating a high responsiveness to changes in price. Inelastic
means the elasticity is less than one, indicating low responsiveness to price changes.
Utility and low dimintising marginal utility
utility is the satisfaction or happiness gained from consuming a good or service, while the law of
diminishing marginal utility states that the satisfaction gained from each additional unit of a good or
service decreases as more is consumed

• Explanation

Marginal utility is the change in total utility that results from consuming one additional unit of a good or
service. It can be positive, negative, or zero. For example, if you have one or two cups of coffee in the
morning and the third cup gives you a higher utility, the marginal utility measures the increase from the
second to the third cup.

The law of diminishing marginal utility is based on the assumption that units of a commodity are
identical, consumed in quick succession, and of a standard size.

The law of diminishing marginal utility is important for businesses and marketers to understand
because it helps predict consumer behaviors like brand switching and seeking out new products.