Diploma for Accounting PDF
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Added on 2020-03-23
Diploma for Accounting PDF
Added on 2020-03-23
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Running Head: Diploma for accounting 1Project Report: Diploma for accounting
Diploma for accounting 2ContentsIntroduction.......................................................................................................................3Comparative analysis of relevant literature......................................................................3Price and Demand Relationship: Normal Goods..............................................................5Price and Demand Relationship: Inferior Goods..............................................................6Price and Demand Relationship: Giffen Goods:..............................................................8Conclusion......................................................................................................................10References.......................................................................................................................11
Diploma for accounting 3Introduction Demand and supply are the crucial elements of an organization’s manufacturing system. These elements are the important aspect of the economical model. In the normal market scenario, the price of a product could vary due to the supplied product level and the demand level of that product. This theory would offer the result to the company in equilibrium of quantity and price. Deductions in the price directly make an impact over the demand increment and whereas if the price would rise than the demand would be decreased. It has been observed that in various cases, comparable income and substitution effect has been witnessed. It has been found that with the in case of diverse situation, the price and demand rules could offer different result. These rules go ahead in the way where substitution effect is quite confirmed1. Though it has been observed that if the entire situations are normal than the changes into the price directly make an impact over the quantity demanded. This depict that the effect of substitution would influence the clients constantly to buy the goods inlesser price. Comparative analysis of relevant literatureIncome effect only works with some assumptions. But in reality, various aspects are there which affects the price and demand relationship. It is a universal fact that the increment in the income would enhance the customer’s buying power. Price and demand relationship could be affected in various situations such as Giffen goods, inferior goods etc2. inferior 1Free, R, C,. (2010) 21st Century economics: A reference handbook, Volume 1, SAGE,India2Hussain, T,. (2010) Engineering economics, Laxmi publications, India
Diploma for accounting 4goods are those goods which are totally opposite to the normal goods as in the scenario of inferior goods, with the increment in the level of income and the demand level decreases suchas if a customer’s income would be enhanced than he will switch from the bread to the pizza and then the demand of bread would be reduced. As now the person would like to go for the superior goods than the inferior goods3. At the same time, it has been observed that the inferior goods have a positive relationship with the income. If the income would be enhanced than the demand would be less and at the same time if the income would be lower than the demand would be enhanced. Further, the changes into the price impact over the purchasing power of the company, if the price would be lowered than the purchasing power of the customer would be enhanced as in that case, customer would be able to save more money for other products4. Consequently, the income effect has been analyzed and it has been observed that it works in the same manner as the substation effect does. Equally the factors are operating towards enhancing the quantity which has been demanded. Further, in the inferior goods case, the effect of income is negative; as it works in the repeal way to the substitution effect.The outcome of price change varies according to the market situation and the customer. Mainly, the price changes get affect due to the main two factors of virtual strength. Thus, the effect of price is directly linked with the substitution effect and the income effect5. 3Boyes, W & Melvin, M,. (2012) Economics, Cengage learning, USA4Chamberlin, E, H,. (2015) International economic association monopoly and competition regulation, Springer, United Kingdom5Gottheil,. (2014) Study guide to Gottheil’s principles of economics, 7th, Cengage learning, USA
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