Price Elasticity of Demand (PED) measures how much the quantity demanded of a product changes when its price changes. It shows how sensitive or responsive consumers are to changes in price.
If PED > 1 → Demand is elastic
Meaning: Price elasticity of demand shows how much the demand for a product changes when its price changes. It helps us understand how sensitive customers are to price changes.
For example:
If the price of ice cream goes up and people stop buying it quickly, the demand is elastic.
But if the price of salt goes up and people still buy it, the demand is inelastic.
Formula:
When non-price factors (like taxes or weather) change, they can shift demand or supply.
For example, if the government adds a tax on cigarettes, the supply decreases (moves left).
This makes the price go up (from P1 to P2) and the number of cigarettes sold go down (from Q1 to Q2).
If supply moves left, prices go up because there’s less to sell — like when bad weather reduces crops.
If supply moves right, prices go down because there’s more to sell — like when farmers get subsidies or the weather is good.
market equilibrium
market equilibrium means the point where demand and supply are equal. At this point, the price is just right — no shortage and no extra goods. This price is called the equilibrium price, and the amount bought and sold is the equilibrium quantity.
Market disequilibrium
market disequilibrium happens when demand and supply aren’t equal. This causes shortages or surpluses.
If the price is too low, more people want to buy than what’s available — this creates a shortage. When that happens, prices usually rise until they reach the equilibrium price again.
the law of supply means when the price goes up, producers supply more, and when the price goes down, they supply less. That’s why the supply curve slopes upward from left to right — showing a positive link between price and quantity supplied.
movement along a supply curve happens only when price changes.
If price rises, producers supply more — this is called an extension in supply.
If price falls, producers supply less — this is a contraction in supply.
Supply is the willingness and ability of producers to sell a good or service at a given price in a given period of time.
It shows how much producers are ready to sell at different prices.
As the price of a good increases, the quantity supplied also increases.
As the price decreases, the quantity supplied decreases.
Demand = when customers are willing and able to pay for a product.(If you only want it but can’t afford it, that’s not real demand — that’s just desire.)
Quantity demanded = how much people will buy at each price level.
When price increases → demand decreases
When price decreases → demand increases
Inflation means a rise in the general price level of goods and services in an economy.
It means money loses value — you can buy less with the same amount.
Example: If prices rise by 5%, what cost ₹100 before will cost ₹105 now.
Definition:Market structure = how a market is organized based on number of firms, type of products, and control over price.
Determines price, quantity, and competition.
1. Perfect Competition
Many sellers, identical products
Firms cannot control price
A firm is an organisation that uses resources (land, labor, capital, and enterprise) to produce goods and services for consumers.
Its main goal is usually to make a profit.
Examples: Apple (electronics), Tata (cars), and local shops.
Factors of production are the resources used to produce goods and services. They are the basic inputs needed for all kinds of production. Economists divide the factors of production into four main groups:
Land
Labor
Capital
Entrepreneurship
Economic development means improving a country’s income, jobs, industries, and living standards.
Countries have different levels of development because of differences in resources, education, technology, and government systems.
The world can be divided into:
Developed countries – rich and advanced (like USA, Japan, Germany)
Developing countries – still growing (like India, Brazil, South Africa)
what is labor force ?
The labor force refers to all the people in a country who are willing and able to work .
It includes :
People who have jobs ( the employed ) ,and
People who are looking for jobs ( the unemployed but able to work .)
Importance of labor force
What is unemployment ?.
Unemployment is when people who are able and willing to work cannot find a job.
Types of Unemployment ?.
Frictional unemployment - Short - term , when people are between jobs .
A shopkeeper sold 20 packets of chips when the price was ₹10 each. When the price increased to ₹15, he sold 35 packets. What does this show about the relationship between price and quantity supplied?