Teaching

1. To analyse demand and supply what three points need to understand, slides.
2. Based on case ….demand supply draw. (consumer goods case)

 Income rises booming economy

 Festive demand, promotional activities
 Price falls because cheaper raw materials for led , high definition camcorders blue
ray disc players.
 Rupees stronger, import cheaper, raw materials for electronic goods become
cheaper
 Indian economy adopted good technology
 The price difference between a normal LCD and an LED TV has come down drastically
and even first-time buyers are considering buying an LED TV these days,"
 Substitute goods price decreases or increases. May be compliments
3. A heat wave and hurricane occur during the same summer. Due to hurricane, a part of
sugarcane crop was destroyed and drives up the price of sugar. What would be the impact on
the market for ice cream? Use demand supply diagram to depict the events and analyse.

Ans. Demand increases and supply decreases. So price increase is inevitable.

Quantity falls increases depend on d degree of shift of demand and supply curves.

Elasticity.
Size of impact bigger…shape of demand supply curve..if shifts how much shift…so price
changes ..quanity changes

How sensitive to price..slope of denad curve

Start with extreme..not real but good device e start with

Perfectly inelastic---no substitute , insulin life savers..heart transplant..if supply shock..all

happened in price increases
Elastic—perfect substitute, candy, icecreme, macdonald, burger king..quanity
switch..notprice change

Govt came along tax policy on tobacco on supply

Slides and

DURABLE—WASHING MACHINE
NON DURABLE----WASHING DETERGENT
one problem solved on elasticity problem (HW)

Price ceiling and price floor TAX ON TOBACCO…I(ALWAYS MKT NOT EQUILIBRIUM THEN HOW
GOVERNMENT INTERFARE..ALSO THIS PRICE CONTROL MECHANISM EVEN IT INCLUDES ROLE
OF GOVERNMENT. Insulin, life saving drugs , inelastic
 STUDENT

POSTER PREENTATION GROUPS..

IDEA OF PRESENTING.
Adhesive usage.

Cross elasticity needs for implementing price strategy…

Send on cases elasticity…two(opec from book ..tourism..or one more case.

TOMORROW
1. DURABLE/NONDURABLE
2. LR/SR
TOBACCO

1. Cigerrate----less elatic
2. Bidi,hukka.jardaleaf tobacco----more price elastic---
3. Study shows---.4-.9 and fr bidi leaf tobacco near unity.
4. Cigarettes, unlike other tobacco products, were found to be luxury goods in both rural
and urban India with income elasticity greater than one

Developecountry upto -.5

Mddle income -.25-.5
Sr elasticity -.17-.78
Lr- .4-1.21
own-price elasticity estimates for rural and urban households are approximately the same,
except for cigarettes which are relatively more inelastic in urban India than in rural India.

If price elastic tax on price can reduce consumption n increase tax revenue

Tax good or bad on bidi cigereatt?

Bidi complimentary to cigerett..leaf in rural

The complementarity between bidis and cigarettes need not be entirely counterintuitive
either. Given the huge difference in the price of bidis and cigarettes in India and the fact
that both these items cater to totally different socio-economic groups, it is perfectly
reasonable to think that consumers who consume either of the products would
occasionally try out a few sticks of the other. Moreover, the complementarity here need
not necessarily mean that increases in the price of one will lead to a dramatic reduction in
consumption of the other. This is primarily because the magnitude of the cross elasticity
coefficient is small

Y not bidi taxed? Reasons?

Benefits>
 The effect of a percentage increase in cigarette price on bidi consumption is very low,
whereas that of a bidi price increase on cigarette consumption is higher. This is especially
true in rural India, for two reasons: (1) the price of bidis is at a very low base compared
with that of cigarettes and (2) a price rise of bidis may have large budgetary implications
for rural households, as bidis are the preferred form of smoked tobacco consumption
there. Hence any increase in the price of bidis will have greater effects in reducing
consumption of cigarettes as well.
The effect of a percentage increase in cigarette price on bidi consumption is very low,
whereas that of a bidi price increase on cigarette consumption is higher. This is especially
true in rural India, for two reasons: (1) the price of bidis is at a very low base compared
with that of cigarettes and (2) a price rise of bidis may have large budgetary implications
for rural households, as bidis are the preferred form of smoked tobacco consumption
there. Hence any increase in the price of bidis will have greater effects in reducing
consumption of cigarettes as well.

Any other way demand can be reducd? Awareness…advertisement..demand side….

MOBILE PHONE
1. PRICE ELASTIC
2. VODAFONE LUXARY
3. SOMETIMES NORMLAL NECESSRY
4. WITH FIXED FONE LOWER CROS PRICE ELASTIY MEANS INDEPENDENT RELATION
5. 2005 LICENSE FEE RDUCED…CHEAP PRICE..MORE SUBSCRIBER
6. HIGHER INCOME HIGHER FANCY HANDSET..ETC.
TWO MAJOR DIFFERENCES…WHEN MARKET IELASTIC…TAX CAUSE HIGHER REVENUE

WHEN MARKET ELASTIC…REDUCE PRICE ..HIGHER DEMAND CAUSE REVENUE

3. ROLE OF GOVERMENT

Consumer behaviour.

Axis needs to be labelled based on which we are going

to determined…
Demand and supply…axis price and quantity are
determined.
Consumer behaviour…. quantities of two goods
determined
1. Ordinal
2. Preferences ..three assumptions
3. Why not MIB and less practical. Den indifference
4. Consumption depends on
preference- indifference curve
budget constraint and prices of two goods
5. Indiffrence curve…properties..MRS
Substitute and complimentary
6. Budget constraint…slope and intercept
7. Equilibrium…tangency…not intersection

Same budget line but references depends on

perosns…consumption different.

Money buys happiness follows mu theory?

MRS is falling
Affordable and unafforadable zone of budget

Conditions of Consumers Equilibrium

Budget constraint shifts when

Pivot when

Identify any shock affect on preferences / money

income or prices
If preferences…indifference curve will go up or down
If money income budget line shifts upward or downward
If prices then pivot with steeper or flatter

Example one----
 1. P (tkt for Bhara increases)..other constant
2. M increases….
3.URI and Bharat…no of persons for first day prefer
more bharat…less URI…

Over he period bcz of performance and content…

preference changed. More on URI and less on bharat.
Given money income and prices for movies same over
the period.

Any shock needs to be understood

Income consumption curve

RISING WATER COSTS FOR FARMERS 80 FEET
BELOW..TIME TO RETHINK ON WATER INTENSIVE
CROPS IN BENGAL….CROPS..COTTON. RICE WILL LOW.
STOPPING RICE WATER IN VIRTUAL EXPORTER OF INDIA
THE SATUS OF WATER RESOURCELOK SABHA STANDING
COMMON REPORT ON WATER RESOURCES 2017-18

INDIA WORLDS LARGEST EXPORTER COUNTRY

Case studies
1. Ford launches Taurus.
Change in pattern of preferences of consumers
..accordingly product launch…

If preference changes …immediate impact and later

impact??????????
2. If budget increases
3. If price of any one good increases
3. Fast food Market

Q1. Why need to understand consumr behaviour for

fast food market?
 Decision based on available resource which are
scarce in nature..time, money, effort, expertise.
Management.
 Two brand of fast food gives almost same utility,
complementary in nature. Nor substitute.
 Rational consumers with perfect informations.
 Price ratio called slope of budget line…decides
steeper or flatter.
 The demand for a particular product by an
individual consumer is based on four important
factors. Firstly, the price of the product determines
how much of the product the consumer buys,
given that all other factors remain unchanged. In
general, the lower the product's price the more a
consumer buys that product. Secondly, the
consumer's income also determines how much of
the product the consumer is able to buy, given
that all other factors remain constant. In general, a
consumer buys more of a commodity the greater
is his or her income. Thirdly, prices of related
products are also important in determining the
consumer's demand for the product. Finally,
consumer tastes and preferences also affect
demand.
  Four factors determine consumption decision.
The firm can, to some extent influence the taste and
preference of consumer through advertising.

The firm can, to some extent influence the taste and

preference of consumer through advertising….
awareness…declaration. Announcement,
advertisement…can change our preference.
Consumers nor= rational but biased, random choose
on impulses.

Marketing Strategy…GOOD QUALITY, TASTE GOOD,

logo pkging.advertisement, PRICE, PLACES WHERE
CAN BE PURCHASED Consumers of fast food are
usually looking for how quick and convenient it will
be to have access to the offer when they need it.
After all, that is the essence of the concept of “fast”
food , (COSTS.ECONY OF SCALE,promotion
sale,undifferentiated..content same brand ..SKILL OF
STAFFMOTIVATION, INVESTMTN ,diff….WHAT
WOULD BE ELASTICITY?

1. Price consumption curve …demand derivation

Price effect
2. Substitution effect and priceeffect. Income effect..
goods different. Indifference curve s are diferent .
preferences and budget both are required . but
managerial impact ..
Think of it intuitively. We'll do it intuitively, and
graphically, and mathematically. Intuitively, it's when a
price goes up, two things happen. On the one hand,
you're like, gee, at that different price ratio, I might
want to substitute my consumption bundle. The second
is, gee, the price just went up, I'm effectively poorer.
And that's also going to affect my demand.
So to see that let's go to the graphical analysis and
figure 6-4. And we're going to actually decompose
income and substitution effects. This is one of the
things that's sort of hard to do it intuitively. The
graphics kind of makes it the most clear.

Price effect..pizza and movies.

Now we're going to say imagine the price of movies has

risen to $12. Well we know that ultimately you'll end
up at a point like c. We demonstrated that before. That
was when we derived the demand curve for movies.
We know that if the price of movies rises from $8 to
$12, your demand for movies will shrink from six
movies to four movies. We already established that.
But now what we can see is that that's actually a
composition of two effects. The first effect is the
Substitution Effect. And the Substitution Effect is the
change in price
3. Production
Money buy happiness
MU is high for poor compared to rich