Economics made easy
When prices increase, demand falls.
This is the most important principle in economics. Everything - the economic policy that is prepared till the potatoes we buy - is governed by this simple rule.
Yet, there are some exceptions to this demand. Just imagine a poor family eating cheap bread daily with a bit of expensive meat. If the price of the bread increases, the demand would still be the same cos of two reasons - 1. Bread is their staple diet and they can't afford anything else. 2. Though the prices of bread has increased, it remains the most affordable.
Another exception is luxury items like gold, which have a demand just because it's costly and a status symbol. For these items, the law of demand doesn't apply.
One more exception is future price-rise expectancy. If we expect the price of a product to increase, then we would flock the shops to get maximum quantity of the product.
(Written after a business journalism class, which was conducted by an ET guy)
This is the most important principle in economics. Everything - the economic policy that is prepared till the potatoes we buy - is governed by this simple rule.
Yet, there are some exceptions to this demand. Just imagine a poor family eating cheap bread daily with a bit of expensive meat. If the price of the bread increases, the demand would still be the same cos of two reasons - 1. Bread is their staple diet and they can't afford anything else. 2. Though the prices of bread has increased, it remains the most affordable.
Another exception is luxury items like gold, which have a demand just because it's costly and a status symbol. For these items, the law of demand doesn't apply.
One more exception is future price-rise expectancy. If we expect the price of a product to increase, then we would flock the shops to get maximum quantity of the product.
(Written after a business journalism class, which was conducted by an ET guy)
posted by Rim at 8:35 PM
3 Comments:
My dear pupil!
Until, never "till"! "Till" refers to a cash register; until is the word you are searching for.
Otherwise, an interesting post. :)
My dear teacher...Not here too, pl gimme a break! Just kidding; thanks for that small usage class.
dude, blogging everyday! cool man! Which magazine are u talking about?
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