Topics
Microeconomic Theory
Demand
- Introduction to Microeconomics and Macroeconomics
- Microeconomics
- Macroeconomics
- Macroeconomics Vs Microeconomics
- Introduction to Demand
- Meaning of Demand
- Features of Demand
- Types of Demand
- Determinants of Demand
- Demand Function
- Quantity Demanded and Demand
- Law of Demand
- Demand Schedule
- Demand Curve
- Individual Demand Curve to Market Demand Curve
- Slope of the Demand Curve
- Linear Demand Curve
- Reasons for the Downward Slope of the Demand Curve
- Importance of the Law of Demand
- Exceptions to the Law of Demand
- Movement Along the Demand Curve
- Change in Demand – Shift in Demand Curve
- Difference Between Extension and Increase in Demand
- Difference Between Contraction and Decrease in Demand
- Cross Price Effects
- Relationship Between Income and Demand
- Impact of Tastes and Preferences on Demand for a Commodity
- Industry Demand Vs Firm Demand
- Concept of Utility
- Cardinal Utility Analysis / Marginal Utility Analysis
- Types of Marginal Utility
- Total Utility and Marginal Utility
- Forms of Utility
- Features of Utility
- Relationship Between Total Utility and Marginal Utility
- Law of Diminishing Marginal Utility
- Exceptions of the Law of Diminishing Marginal Utility
- Importance of the Law of Diminishing Marginal Utility
- Consumer's Equilibrium through Cardinal Utility Approach
- Law of Equi-Marginal Utility
- Exceptions of the Law of Equi-marginal Utility
- Importance of the Law of Equi-marginal Utility
- Ordinal Utility Analysis/Indifference Curve Analysis
- Indifference Schedule
- Indifference Curve
- Indifference Map
- Marginal Rate of Substitution (MRS)
- Assumptions of Indifference Curve Analysis
- Properties of Indifference Curves
- Price Line or Budget Line
- Consumer's Equilibrium through Indifference Curve Approach
- Comparison of Utility Theory and Indifference Curve Theory
- Consumer's Equilibrium through Indifference Curve Approach
- Relationship Between Marginal Rate of Substitution and Marginal Utility
Theory of Income and Employment
Elasticity of Demand
- Introduction to Elasticity of Demand
- Meaning and Types of Elasticity of Demand
- Price Elasticity of Demand
- Classification of Price Elasticity - Degrees of Price Elasticity of Demand
- Methods of Measuring Price Elasticity of Demand
- Percentage or Proportionate Method
- Total Expenditure Method
- Point Method (Geometric Method)
- Arc Elasticity of Demand
- Revenue Method
- Numerical Problems of Price Elasticity of Demand
- Factors Affecting Price Elasticity of Demand
- Importance of Elasticity of Demand
- Income Elasticity of Demand
- Types of Income Elasticity of Demand
- Importance of Income Elasticity
- Cross Elasticity of Demand
- Туpes of Cross Elasticity of Demand
- Limitations of Cross Elasticity of Demand
- Importance of Cross Elasticity of Demand
Supply
- Concept of Supply
- Individual and Market Supply
- Distinction Between Supply and Stock
- Determinants of Supply
- Supply Function
- Law of Supply
- Supply Schedule
- Supply Curve
- Derivation of Market Supply Curve From Individual Supply Curves
- Explanation of the Law of Supply
- Time Period and Supply
- Exceptions to the Law of Supply
- Movement Along the Supply Curve Or Expansion and Contraction of Supply
- Shift of the Supply Curve or Change in Supply
- Expansion of Supply and Increase in Supply
- Contraction of Supply and Decrease in Supply
- Elasticity of Supply
- Meaning and Types of Elasticity of Demand
- Price Elasticity of Supply
- Categories (Degrees) of Elasticity of Supply
- Measurement of Elasticity of Supply > Percentage Method
- Measurement of Elasticity of Supply > Geometric or Point Method
- Determinants of Elasticity of Supply
- Importance of Elasticity of Supply
Money and Banking
Balance of Payments and Exchange Rate
Market Mechanism
- Introduction to Market Mechanism
- Basic Concepts of Equilibrium and Equilibrium Price
- Equilibrium Price and Quantity in a Competitive Market
- Changes in Equilibrium
- Effects of Changes (Shifts) in Demand on Equilibrium Price and Equilibrium Quantity
- Effects of Changes (Shifts) in Supply on Equilibrium Price and Equilibrium Quantity
- Effects of Simultaneous Changes (Shifts) in Demand and Supply
- Some Special Cases of Equilibrium
- Importance of the Element in the Determination of Price
- Applications of Tools of Demand and Supply Price Control
- Mаximum Price Legislation or Price Ceiling and Rationing
- Minimum Price Legislation or Floor Price
- Important Areas of Applications of Tools of Demand and Supply Curves
- Meaning of Perfect Competition
- Assumptions and Conditions of Perfect Competition
- Pure and Perfect Competition
- Time Element in the Theory of Price Determination
- Determination of Equilibrium Prices
- Normal Price and Law of Returns
- Comparison between Market Price and Normal Price
- Practical Applications of Tools of Demand and Supply Analysis
Public Finance
Concepts of Production
- Concept of Production
- Product
- Factors of Production
- Production Function
- Short-run and Long-run
- Features of Production Function
- Types of Production Functions
- Some Basic Concepts - Total, Average and Marginal Physical Products
- Relationship between Average Product (AP) and Marginal Product (MP)
- Relationship between Total Product (TP) and Marginal Product (MP)
- Returns to a Factor - Laws of Returns to a Variable Factor
- Law of Variable Proportions
- Statement of the Law of Variable Proportions
- Assumptions of the Law of Variable Proportions
- Illustration of the Law of Variable Proportions
- Three Stages of Production
- Explanation of the Law of Variable Proportions
- Stages of Operation and the Decision to Produce
- Conditions Or Causes of Applicability
- Applicability of the Law of Variable Proportions
- Changes in Production
- Returns to a Factor or Law of Returns
- Law of Variable Proportions and Returns to Scale Compared
- Variation of Output in the Long Run - Returns to Scale
- Scale of Production
- Concept of Indivisibility
- Economies of Scale
- Diseconomies of Scale
National Income
Cost and Revenue
- Introduction to Cost of Production
- Money Cost Or Accounting Cost / Explicit Cost
- Economic Cost
- Opportunity Cost
- Real Cost
- Private and Social Cost
- Fixed Cost and Variable Cost
- Different Cost Concepts
- Total Cost Curves
- Average Cost Curves
- Marginal Cost (MC)
- Relationship between Average and Marginal Cost
- Long-Run Cost Curves
- Long-run Average Cost (LAC) Curve
- Long-run Marginal Cost (LMC) Curve
- LAC Curve U-shaped - Economies and Diseconomies of Scale
- Numerical Problems Long-run Cost Curves
- Revenue Concepts
- Behaviour of Revenue Under Different Market Structures
- Relationship Between Total, Average and Marginal Revenues Under Perfect Competition
- Relationship Between Total, Average and Marginal Revenue Under Imperfect Competition
- Significance of Revenue Curve
- Numerical Problems of Revenue
Main Market Forms and Equilibrium of a Firm
- Concept of Market
- Market Structure
- Classification of Market Structure
- Perfect Competition
- Monopoly
- Monopolistic Competition
- Oligopoly
- Duopoly
- Bilateral Monopoly
- Concept of Monopsony
- Other Forms of Market
- Factors Determining Market / Extent of Market
- Demand Curves of Firms under Different Market Forms
- Comparison between different forms of market
CISCE: Class 12
Meaning of Market Price and Normal Price
- Market price is the price that actually prevails in the market at a particular time or day in the very short period.
- Normal price is the price that tends to prevail in the long run when demand and supply have fully adjusted and firms earn only normal profit.
CISCE: Class 12
Main differences between Market Price and Normal Price
| Basis | Market Price | Normal Price |
|---|---|---|
| 1. Time period | Short‑period price; exists at a particular moment or day. | Long‑period price tends to prevail over many months/years. |
| 2. Equilibrium type | Result of temporary or short‑run equilibrium between demand and supply. | Result of long‑run or permanent equilibrium when firms can enter/exit. |
| 3. Role of demand & supply | Demand is active; supply is relatively fixed in the very short period. | Supply is active and adjusts to demand; demand is taken as given in the long run. |
| 4. Real vs probable price | Actual prevailing price at a given time (real price). | Price expected to prevail in the long run (probable price). |
| 5. Relation with cost | May be greater than, less than, or equal to average cost (AC). Firms may earn supernormal profits or losses. | Always equals long‑run average cost (LAC) at its minimum; firms earn only normal profit. |
| 6. Profit and loss | Can give normal profit, super‑normal profit, or even loss. | Leads only to normal profit in the long run. |
| 7. Stability of price | Changes quickly and frequently; highly unstable. | Relatively stable and changes slowly over time. |
| 8. Nature of forces | Influenced mainly by temporary forces such as weather, festivals, strikes, news, sudden changes in tastes, etc. | Influenced by more permanent forces like technology, cost of factors, and scale of industry. |
| 9. Kinds of goods | Can be found for all goods: perishable, durable, reproducible, and non‑reproducible. | Mainly relevant for durable and reproducible goods where long‑run production is possible. |
CISCE: Class 12
Graphical idea
- Draw a horizontal line labelled Normal Price (NP).
- Around it, draw a zig‑zag line labelled 'Market Price (MP)' showing prices moving above and below NP over time.
- The zig‑zag shows frequent short‑run fluctuations, while NP remains comparatively steady.
CISCE: Class 12
Real-Life Application
- Example of market price: On a hot summer afternoon, a sudden increase in demand for ice cream can push its price up for that day. If rain starts suddenly, demand falls and price drops again. This day‑to‑day price is the market price.
- Example of normal price: Over several seasons, as firms enter and exit the ice‑cream industry, costs and supply adjust so that price settles around a level where firms just earn normal profit. This long‑run level is the normal price.
A useful analogy is to think of normal price as the average water level of the sea and market price as the waves and tides rising above or falling below that level.
CISCE: Class 12
Key Points: Comparison between Market Price and Normal Price
- Market price is a short‑run, actual price driven mainly by current demand when supply is fixed.
- Normal price is a long‑run equilibrium price determined by cost and full adjustment of demand and supply.
- Market price oscillates around normal price; in the long run, firms earn only normal profit where Price = minimum LAC.
