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Absence Of Close Substitute Of Product Economics



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    Monopoly refers to a market state of affairs where there is a individual house selling the trade good and there is no close replacement of the trade good, e.g. , Posts and cable, Issue of currency notes by RBI, etc. Monopoly is opposite of perfect competition. Since a monopolizer is more or less free to bear down any monetary value for his merchandise, hence, a monopolizer is said to be the monetary value taker non a monetary value shaper.

    In monopoly, the differentiation between the industry and house is non at that place. The monopolist house is non merely a house, it besides constitutes the whole industry. It is the lone house bring forthing the merchandise in inquiry. The house, therefore, takes on the features of the industry and has a demand ( mean gross ) curve, which slopes downward merely as the demand curve for the merchandise of an industry. The demand curve of the monopolizer coincides with the industry demand curve. Its incline represents the extent of control of the monopolizer over the monetary value of the merchandise.

    Features of monopoly

    Single marketer of the trade good:

    There is merely one marketer or manufacturer of a trade good in the market. As a consequence, the monopoly house has full control over the supply of the trade good the monopolizer may be an single, affirm or a group of houses or a authorities corporation or even authorities itself.

    Absence of close replacement of merchandise:

    The merchandise sold by the monopolizer has no close replacement. Though some Substitutes if the merchandise may be available, yet they are no close replacements in the sense that such replacements are non indistinguishable to the merchandise.

    Difficult entry of a new house:

    The monopolizer controls the state of affairs in such a manner that it becomes really hard for a new house to come in a monopoly market and complete with the monopolizer by bring forthing a homogenous or indistinguishable merchandise. The monopolizer tries his uttermost to barricade the entry of a new house.

    Negative sloped demand curve:

    The demand curve ( or AR curve ) confronting a monopolizer is negatively aslant which indicates that a monopolizer can sell more merely by the heavy monetary value. Price has to be reduced to sell extra units. Since monopolizer is merely marketer in the market, hence the demand curve confronting him is the market demand curve.

    Monetary value shaper with restraints:

    Since a monopoly house is the lone marketer and has no rival, therefore it can repair the monetary value partly. It has significant influence over the monetary value of its merchandise by pull stringsing its supply. It is because of this place that monopolizer is said to be a monetary value shaper.

    Monetary value favoritism:

    Unlike unvarying monetary values at which a merchandise is sold in perfect competition, a monopolizer can bear down different monetary values for his merchandise from different individuals and in different markets countries. In other words, monetary value favoritism takes topographic point in monopoly.



    P = monetary value

    Q = measure


    TR ( Total gross ) :

    It may be defined as the entire sum of money realised by the house from the sale of its entire end product. It is the same thing as the entire outgo by the purchasers on purchase of the merchandise of the house.


    AR ( Average gross ) :

    It is the gross per unit of the merchandise sold ; AR is calculated by spliting the entire gross by the no of unit sold.



    MR ( Marginal gross ) :

    Fringy gross is the add-on to the entire gross from sale of an extra unit of a trade good ; it is the net add-on to the entire gross. When an extra unit of end product is sold.




    TR additions when MR is positive, decreases when MR is negative ( i.e. below nothing ) and becomes maximal when MR is zero.

    MR decreases with an addition in end product because more of a merchandise can be sold by cut downing its monetary value. In the beginning MR is positive and after a certain degree of end product, MR becomes negative.

    TR additions with end product ab initio and so it decreases. Thus diagrammatically TR curve rises ab initio and so falls. As a consequence, TR curve is reciprocally U- shaped.

    AR curve of the house is in fact, demand curve faced by the house because AR of a house is equal to monetary value of the trade good. Monopolist AR curve like demand curve is downward inclining ( or negatively sloped ) which means more can be sold at a lower monetary value.

    MR is less than AR ( MR & lt ; AR ) and hence, MR curves lies below AR curve. MR is less than AR because a monopolist house can sell more by take downing monetary value

    .TR curve is reverse U- shaped because TR additions in the beginning and so decreases with end product.


    End product

    PRICE ( RS )

    TR ( RS )

    AR ( RS )

    MR ( RS )









































    Q “ Inferior goods are non those goods in instance of which the jurisprudence of demand fails, inferior goods are those goods in instance of which income consequence is negative or these are the goods the demand for which decreases when income additions. Yes, jurisprudence of demand fails in instance of GIFFIN GOODS. It is in the instance of these goods that there is

    { a } opposite relationship between income and demand

    { B } positive relationship between monetary value and demand ”

    In the visible radiation of above statement explains the undermentioned statement with the aid of an illustration:

    Law OF Demand

    The jurisprudence of demand explains the relationship between the monetary value and the measure demanded of a trade good, presuming other factors impacting the demand to be changeless. Harmonizing to jurisprudence, “ others things being changeless, measure demanded of a trade good is reciprocally related to the monetary value of the trade good. Price and demand moves in a opposite way.

    In economic sciences, the jurisprudence of demand is an economic jurisprudence, which states that consumer purchase more of a good when its monetary value is lower and less when its monetary value is higher.

    The Law of demand provinces that the measure demanded and the monetary value of a trade good are reciprocally related, other things staying changeless. That is, if the income of the consumer, monetary values of the related goods, and penchants of the consumer remain unchanged, so the alteration in measure of good demanded by the consumer will be negatively correlated to the alteration in the monetary value of the good.


    There should be no alteration in the monetary value of related goods.

    There should be no alteration in the income of consumer.

    There should be no alteration in the gustatory sensation, penchant and wonts of the consumer.

    There should be no alteration in the figure of household members, weather etc.

    Demand Agenda:

    It is a tabular statement demoing different measures of a trade good demanded at different monetary values during given period of clip.

    Demand CURVE:

    A demand curve is graphical representation of the demand agenda.

    Explaining with agenda & A ; diagram

    Monetary value of sugar ( Rs )

    Measure demanded ( kilogram )











    Exceptions TO THE LAW OF DEMAND

    Inferior good or giffen good:

    Giffen good are a particular class of inferiors goods in whose instances demand for a trade good falls with a autumn in its monetary value. In instance of certain inferior goods, when their monetary value falls, their demand may non lift because excess buying power ( caused by autumn in monetary value ) is diverted on purchase of superior goods. For case, if monetary value of inferior nutrient grain like ‘jowar ‘ falls in India, people may demand less of it and alternatively get down eating wheat or rice. Here jowar is a instance of giffen good whose autumn in demand due to substitution consequence.

    It may be noted that goods whose demand falls with autumn in monetary value are called giffen goods. Between two effects ( income consequence & A ; permutation consequence ) of monetary value alteration, negatively consequence is so strong that it overweights the positive permutation consequence with the consequence that with a autumn in monetary value of a trade good its ( here bajra ) measure demanded besides falls.


    The jurisprudence of demand is non seen runing in the instance of necessities of life such as nutrient grains, salt, lucifers, milk for kids etcaˆ¦


    Besides ignorant of all monetary values, a consumer may purchase more of a trade good when its monetary value in fact gone up.

    Goods expected to go scarce or dearly-won in future:

    They are purchased by the families in increased measures even when their monetary values are surging upwards. This is due to fear of future rise in the monetary values.

    Goods of fanfare:

    Status symbol goods are purchased non because of their intrinsic value but because of position or prestigiousness value. The same jewelry maker when sold at a lower monetary value sells ill but offered at four times the monetary value, sells rather good. Similarly, demand for Maruti autos has been lifting in malice of fact that its monetary value has been lifting continuously.


    Future alterations in monetary values, alteration in conditions conditions, alteration in manner and loss of religion are some of other exclusions where jurisprudence may non keep good.


    Normal goods are those goods whose income consequence is positive, i.e demand for such goods additions as income additions. When rise in income of a consumer leads to lift in his demand for a good, that good is called a normal good.

    In instance of normal goods, income consequence is positive, when income goes up, demand for such goods besides goes up and when income falls demand besides falls.


    INFERIOR GOODS are those goods whose income consequence is negative, i.e. demand for such goods falls as income additions. In other words, when rise in income of a consumer leads to fall in his demand for a good that good is called inferior good. Therefore there is a reverse relation between income and demand for an inferior good.

    A good is called inferior when a rise in the income of its purchasers consequences in a autumn in its demand. In instance of inferior good, income consequence is negative.


    Relationship between income and demand for a trade good.

    In instance of an inferior good, an addition in income leads to diminish in demand and switch the demand curve to go forth.

    For e.g. : –

    1.A rise in the income of a purchaser of a trade good increases his demand for a normal good like full pick milk but decreases the demand of an inferior goods like toned milk. As income of a consumer rises from Rs.7000 to Rs. 8000, demand for toned milk at the same monetary value OP decreases from OQ to OQ1. As a consequence, the demand curve DD shifts leftward as demand curve DD1


    2. Transportation provides a good illustration. When income is low, it makes sense to sit the coach. But as income additions, people stop siting the coach and get down purchasing autos. It ‘s acceptable to most people to sit the coach when they ca n’t afford a auto. But every bit shortly as they can afford one, they buy a auto and halt siting the coach. Bus siting diminutions as income additions.


    A consumer good for which demand rises when the monetary value additions, and the demand falls when the monetary value lessenings. The phenomenon is noteworthy because it violates the jurisprudence of demand, where by demand should increase as monetary value falls and lessening as monetary value rises. To be a giffen good, the point must miss easy replacements and it must be an inferior good for which demand declines as the degree of income in the economic system addition


    For eg: –

    1.Fine vino can be used as an illustration. A all right vino is frequently judged by its monetary value, high monetary value is declarative of quality. If the monetary value falls, less may be demanded because it is no longer considered a premium merchandise, to boot, there are non a batch of close replacement for a all right, aged bottle of vino.

    2.LETS ‘s go through an illustration of a giffen good, utilizing murphies and steak as the pick set of the consumer. Imagine the consumer has a budget of $ 30, and the cost of a murphy begins at $ 0.50 and the monetary value of a steak is $ 10.00. Besides consider that the consumer needs to purchase repasts for 10 yearss. With the original budget and monetary values, the consumer may take to devour 2 steaks, at $ 20, and 20 murphies for $ 10 over this clip frame to utilize up their full budget. This is a satisfactory sum because they will hold on mean 2 murphies a twenty-four hours, and 2 steaks over the period.

    Now imagine a monetary value addition of murphies to $ 1 each. The consumer could still purchase 2 steaks, but could now merely purchase 10 murphies. This might go forth them hungry, so it is possible they will purchase less steak, and more murphies in order to acquire their Calories. This means that 20 murphies will still be purchased, but now merely 1 steak is purchased.

    If the monetary value of a murphy increased once more, say to $ 1.25, so the consumer would merely be able to acquire 16 murphies for $ 20, which may non be adequate Calories to last. They will diminish their steak ingestion by one, and utilize that money to purchase more murphies in order to acquire the necessary energy. This shows how ingestion of a good would lift with a monetary value addition.

    At this point, the consumer ‘s full budget is taken up by the giffen good, so any monetary value addition now will ensue in a lessening of the sum of good the consumer is able to purchase. Therefore, we will hold our typical downward inclining demand curve.




    Monetary value rises for a Normal good




    Monetary value rises for an inferior good

    Positive but overpowered by –



    Monetary value rises for a giffen good

    A strong positive consequence overpowers



    Why must a Giffen good be an inferior good, but an inferior good demand non be a Giffen good?

    The demand for inferior good lessenings when income rises. Demand increases for normal goods when income rises. The authoritative illustration of an inferior good is Ramen noodles. When income rises, one will purchase better nutrient and no longer hold to eat like a college pupil.

    A Giffen good is any good where measure demanded additions when monetary value additions. Most goods have a negative snap of demand ; that is to state, when monetary value additions, measure demanded lessenings. Giffen goods have a positive snap of demand. Giffen goods besides lack close replacements. It is really hard to happen good illustrations of Giffen goods, but sometimes all right vinos are used as an illustration. A all right vino is frequently judged by it ‘s monetary value – high monetary value is declarative of quality. If the monetary value falls, less may be demanded because it is no longer considered a premium merchandise. Additionally, there are non a batch of close subsitutes for a all right, aged bottled of vino.

    The negative income consequence is ever greater than the positive permutation consequence ( true for Giffen goods, but non all inferior goods ) . Since Giffen goods ever ever have negative income effects, they must ever be inferior goods. Therefore, a Giffen good is ever an inferior good, but an inferior good is non ever a Giffen good.

    Q3. Mention latest alterations in economic systems of different states whose categorization is on the undermentioned footing:

    Advanced economic systems: post-industrial states characterized by high per-capita income, extremely competitory industries, and well-developed commercial substructure. E.g. , Australia, Canada, Japan, United States, and Western European states.

    Developing economic systems: low-income states characterized by limited industrialisation and dead economic systems. E.g. , most low income states in Africa, Latin America, and Asia, such as Bangladesh, Nicaragua and Zaire.

    Emerging market economic systems: a subset of former developing economic systems that have achieved significant industrialisation, modernisation, improved life criterions, and singular economic growing. They are some 27 states in East and South Asia, Latin America, Middle East and Eastern Europe. Examples: Brazil, Russia, Africa, China.


    The developed states are the high income states such as the USA and Canada in North America ; UK France, Germany, Norway, Switzerland, Japan and other states etc. These states have strong and diversified economic constructions, good developed industrial, agribusiness, and service sectors, efficient, skilled and good disciplined manpower, all of which contribute to their higher national and guarantee descent populating criterion to their people. The state must hold a strong and diversified economic construction. This means that the economic system must dwell of a figure of diverse and varied economic activities that are good developed. The national merchandise of the state should flux from all these diverse and varied activities and non from merely a few activities. Therefore, states like Saudi Arabia, Kuwait, and some other oil exporting states, are really rich, their people have high incomes that are comparable to the advanced economic states. It is called a developed economic system.


    Economy of Japan

    The economic system of Japan is the 3rd largest in the universe [ 8 ] after the United States and the People ‘s Republic of China and is the universe ‘s 2nd largest developed economic system [ 9 ] Harmonizing to the International Monetary Fund, the state ‘s per capita GDP ( PPP ) was at $ 34,739 or the 25th highest in 2011. Japan is a member of Group of Eight.

    Japan is the universe ‘s 3rd largest car fabricating state, has the largest electronics goods industry, and is frequently ranked among the universe ‘s most advanced states taking several steps of planetary patent filings. [ 10 ] Facing increasing competition from China and South Korea, fabrication in Japan today now focuses chiefly on hi-tech and preciseness goods, such as optical equipment, intercrossed autos, and robotics.

    Japan is the universe ‘s largest creditor state, [ 11 ] by and large running an one-year trade excess and holding a considerable net international investing excess. As of 2010, Japan possesses 13.7 % of the universe ‘s private fiscal assets ( the 2nd largest in the universe ) at an estimated $ 14.6 trillion. [ 12 ]

    Economy of Japan

    Skyscrapers of Shinjuku 2009 January.jpg

    Fiscal Centre in Tokyo




    Nipponese Yen ( JPY )

    Fiscal twelvemonth

    1 April – 31 March

    Trade administrations

    APEC, WTO, OECD, G-20, G8 and others



    $ 5.765 trillion ( 2011 est. )

    $ 4.342 trillion ( 2011 est. )

    GDP growing

    1.3 % ( Q2 2012 )

    GDP per capita

    $ 45,934 ( 2011 est. )

    $ 34,756 ( 2011 est. )

    GDP by sector

    agribusiness: 1.4 % , industry: 22.9 % , services: 75.7 % ( 2010 est. )

    Inflation ( CPI )

    0.4 % ( April 2011 ) [ 1 ]


    below poorness line

    14.7 % [ 2 ]

    Labour force

    65.674 million ( 2010 est. )

    Labour force

    by business

    agribusiness: 4 % , industry: 28 % , services: 68 % ( 2009 est. )


    4.8 % ( April 2011 ) [ 1 ]

    Main industries

    motor vehicles, industrial and transit equipment, electronics, chemicals, steel, machine tools, processed nutrients, non-ferrous metals

    Development Economies

    Developing states are these yearss referred to as the ‘ developing states ‘ signifying that these hapless developing states are capable of doing sensible economic advancement through organized attempts good positive policies and with a step of economic aid provided by the advanced states. In fact most of these states are doing serious attempts to get the better of their deep rooted job of low income, poorness, unemployment, and retardation. This attack to call hapless economic systems as the ‘developing states ‘ seeks to foreground their potency for development and topographic points assurance in their capableness to do better usage of resources to catch up with the modern-day advanced states.

    In kernel, a developing economic system exhibits a mixture of some characteristics of a backward and dead economic system and those of a dynamic progressive economic system. A developing economic system is basically an developing economic system on the March to come on and prosperity. It is an economic system which has, through witting attempts, shed off some load of its retardation and stagnancy and is doing sensible advancement in many socio- economic domains of activity. However, in many others countries, the economic system may still be demoing non much perceptible alteration and therefore go on prevailing with its backward character and developing position. The indispensable feature of a developing economic system is its will to acquire rid of the ageless jobs originating out of its past stagnancy and do a steady advancement with bravery and finding to accomplish degrees of prosperity for guaranting better quality of life enjoyed by the multitudes in the modern-day advanced states. And all this, these developing states want to accomplish within a much shorter clip frame compared to the states of slow and gradual procedure of advancement that the advanced states took to accomplish their present position.

    Economy of India

    The economic system of India is the 11th largest in the universe by nominal GDP and the 3rd largest by buying power para ( PPP ) The state is one of the G-20 major economic systems and a member of BRICS. On a per capita income footing, India ranked 140th by nominal GDP and 129th by GDP ( PPP ) in 2011, harmonizing to the IMF.

    After the independence-era Indian economic system ( before and a little after 1947 ) was inspired by the Soviet theoretical account of economic development, with a big public sector, high import responsibilities combined with interventionist policies, taking to monolithic inefficiencies and widespread corruptness.

    India recorded the highest growing rates in the mid-2000s, and is one of the fastest-growing economic systems in the universe. India has recorded a growing of over 200 times in per capita income in a period from 1947 ( INR 249.6 ) to 2011. India is the 19th largest exporter and 10th largest importer in the universe

    Economy of The Republic of India

    Mumbai Skyline at Night.jpg

    Mumbai, fiscal Centre of India.


    11th ( nominal ) / 3rd ( PPP )


    1 Indian Rupee ( INR ) ( INR ) = 100 Paisa

    Fiscal twelvemonth

    1 April – 31 March



    $ 1.677 trillion ( nominal: 11th ; 2011 ) [ 1 ]

    $ 4.458 trillion ( PPP: 3rd ; 2011 ) [ 1 ]

    GDP growing

    5.6 % ( Q1, 2012 ) [ 2 ]

    GDP per capita

    $ 1,388 ( nominal: 140th ; 2011 ) [ 1 ]

    $ 3,695 ( PPP: 129th ; 2011 ) [ 1 ]

    GDP by sector

    agribusiness: 17.2 % , industry: 26.4 % , services: 56.4 % ( 2011 est. )

    Inflation ( CPI )

    WPI: 7.56 % ( August 2012 ) [ 3 ]

    Consumer price index: 10.04 % ( August 2012 ) [ 4 ]


    below poorness line

    29.9 % ( 2010 )

    ( Note: 32.8 % unrecorded on less than $ 1.25 a twenty-four hours

    68.8 % unrecorded on less than $ 2 a twenty-four hours ) [ 5 ]

    Gini coefficient

    36.89 ( List of states )

    Labour force

    487.7 million ( 2011 est. )

    Labour force

    by business

    agribusiness: 52 % , industry: 14 % , services: 34 % ( 2009 est. )


    9.9 % ( 2011 est. ) [ 6 ]

    Average gross wage

    $ 1,410 annually ( 2011 ) [ 5 ]

    Main industries

    fabrics, chemicals, nutrient processing, steel, transit equipment, cement, excavation, crude oil, machinery, package, pharmaceuticals

    Ease of Making Business Rank

    132nd [ 7 ] ( 2012 )



    $ 299.5 billion ( 2011 est. )

    Export goods

    crude oil merchandises, cherished rocks, machinery, Fe and steel, chemicals, vehicles, dress

    Main export spouses

    UAE 14 % , US 11.4 % , China 6.3 % , Singapore 5.4 % ( 2011 )


    $ 461.3 billion ( 2011 est. )

    Import goods

    petroleum oil, cherished rocks, machinery, fertiliser, Fe and steel, chemicals

    Main import spouses

    China 12.2 % , UAE 8.3 % , Saudi Arabia 5.8 % , US 5.1 % , Switzerland 4.8 % ( 2011 )

    FDI stock

    $ 47 billion ( 2011-12 ) ]

    Gross external debt

    $ 289.7 billion ( 31 December 2011 est. )

    Public fundss

    Public debt

    68.05 % of GDP ( 2011 est. ) [ 9 ]

    Budget shortage

    5.8 % of GDP ( 2011-12 )


    $ 195.4 billion ( 2011 est. )


    $ 309.8 billion ( 2011 est. )

    Economic assistance

    $ 2.108 billion ( 2008 ) [ 10 ]

    Emerging Market Economies

    The term underdevelopment refers to that province of an economic system where degrees of life of multitudes are highly low due to really low degrees of per capita income ensuing from low degrees of per capita income ensuing from low degrees of productiveness and high growing rate of population. Harmonizing to the united State ‘s definition, “ An developing state is one which has a existent per capita income that is lower in relation to the existent per capita income of the USA, Canada, Australia and Western Europe ” . Emphasis here is on the low income relation to the advanced states and deficiency of any perceptible success in doing significant betterments in quality of life of the multitudes. In other words, developing state is merely another name by which a hapless backward state is known.

    Jacob Viner defines an developing state as one “ which has good potency for utilizing more capital or more labors or more available natural resources, or all of these, to back up its population on a higher degree of life ” .

    Planing committee of India in its papers ‘THE FIRST FIVE Year Plan ‘ expressed similar positions and observed “ An developing state ‘s economic system is characterized by the being in a greater or lesser grade, of unutilized or underutilized work force, on the one manus and of undeveloped natural resources on the other. This province of personal businesss may be due to stagnation of techniques or to certain suppressing socio- economic factors which prevent the more dynamic forces in an economic system from asseverating themselves ” .

    Economy of Africa

    The economic system of Africa consists of the trade, industry, agribusiness, and human resources. As of 2012 [ update ] , about 1.07 billion people were populating in 54 different states. Africa is a resource-rich continent but many African people are hapless. Recent growing has been due to growing in gross revenues in trade goods, services, and fabrication.

    Africa is the universe ‘s poorest inhabited continent, as measured by GDP per capita. However, parts of the continent have made important additions over the last few old ages. In recent old ages, African states consist of the fastest turning economic systems in the universe.

    Economy of Africa


    1,365,000,001 ( 15 % ) ( 2012 [ 1 ] )


    Currency: US $ 1.184 trillion, a‚¬1.80 trillion ( 2009 )

    Palatopharyngoplasty: US $ 2.100 trillion ( 2009 )

    GDP growing

    Per capita: 5.17 % ( 2004-2006 )

    GDP per capita

    Currency: US $ 1,200, a‚¬1,000 ( 2009 )

    Palatopharyngoplasty: US $ 1,968, a‚¬1,500 ( 2009 )

    Millionaires ( US $ )

    100,000 ( 0.02 % )

    Income of top 10 %

    44.8 %

    Peoples populating less than US $ 1 per twenty-four hours

    36.3 %

    External debt as a per centum of GDP

    60.8 %

    25.6 % ( 2007 ) International monetary fund

    External debt payments a as per centum of GDP

    4.3 %

    3.1 % ( 2007 ) International monetary fund

    Foreign assistance gross as a per centum of GDP

    3.3 %




    ( million )


    ( Billion US $ )

    Relative portion in the universe ( % )


    ( I ) Low income states




    ( two ) Middle income

    ( a ) lower

    ( B ) upper










    ( three ) Developing states [ ( I ) + ( two ) ]




    ( four ) High income states




    ( V ) Universe




    hypertext transfer protocol: // q=tbn: ANd9GcQ8Q4GXvHltq5QaQM9tpjUKCfkYJJ — 6sc-QbxVKTeoHAX2CpVm0g

    Estimates of per capita Gross National Income


    Estimates Based on

    Exchange rate

    Estimates based on buying power para

    Developed states


    United kingdom


























    Under developed states


























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