DATA RESPONSE IN ECONOMICS

WHAT IS BUDGET LINE?  A budget line is a straight line that slopes downwards and consists of all the possible combinations of the two goods which a consumer can buy at a given market price by allocating all his/her income. It is an entirely different concept from that of an indifference curve, though they are both are essential for consumer equilibrium The two essential components of a budget line are: The purchasing power of a consumer, i.e. his/her income; The market price of both commodities. EQUATION OF BUDGET  The concept of the budget line is precisely explained through the following equation:               Px/Py = Qx/Qy where;  Px is the price of goods X; Qx is the quantity of goods X; Py is the price of goods Y; Qy is the quantity of goods Y; M is the income of the consumer.  ASSUMPTIONS OF A BUDGET LINE As we know that economics is mostly based on assumptions, so goes for the budget line. To make the results and analysis more clear and easy to understand, t

TYPES OF DEMAND COMPLEMENTARY (JOINT) DEMAND: This is the demand that occurs when two or more goods are needed or required together at the same time by a consumer, eg tea and sugar, car and petrol. Increase in the demand for car will lead to increase in demand for petrol, vice-versa. COMPETITIVE (SUBSTITUTE) DEMAND: This is the demand that occurs when two goods are close substitute and serve the same purpose. In this case, when there is an increase in the price of one commodity that has close substitute to another, its demand will fall as consumers will shift to the other close substitute goods with lower price and the demand for the close substitute goods will increase, eg fish and meat, tea and coffee, butter and margarine, pen and biro. COMPOSITE DEMAND: This is the demand that occurs when the total demand for a single commodity will serve many useful purposes. For example, cocoa beans is demanded for making cocoa beverages, cocoa bread, cocoa wine and chocolate. Cassava is dema

WHAT IS ECONOMICS OF SCARCITY? Economics of scarcity has to do with the substitution of the production of the commodity for one another. This entails optimum utilisation of valuable resources at every point on the production possibility curve. Production possibility curve  Production possibility curve or transformation curve is the presentation in a graphical form of all possible combination of two commodities in which a society can produce by employee full and efficient resources at a given state of technology   It shows the maximum output of one goods possible with the available resources given the house built of other goods . History feels all possible combination of total output of a society. It should be noted that every economic system is faced with the problem of resources allocation . This is because resources are scarce relative to demand for them. They have four choices to be made on whether to produce more of product A or b. Discuss resources should be put to alternative use