Concepts of
Economics
S.No
|
Cause
|
Effect
|
Reasoning/Explanation
|
1
|
When price
of a good increases
|
Quantity
demanded falls
|
Law of
demand
|
2
|
When price
of a good increases
|
Quantity
supplied rises
|
Law of
supply
|
3
|
When price
of a good decreases
|
Quantity
demanded rises
|
Law of
demand
|
4
|
When price
of a good decreases
|
Quantity
supplied falls
|
Law of
supply
|
5
|
When demand
increases
|
Price also
increases
|
Competition
among buyers take place
|
6
|
When demand
decreases
|
Price also
decreases
|
Competition
among sellers take place
|
7
|
When supply
increases
|
Price falls
|
Competition
among sellers take place
|
8
|
When supply
decreases
|
Price rises
|
Competition
among buyers take place
|
9
|
Technology
improves
|
Cost of
production falls
|
Advance
technology is cost saving
|
10
|
Price of
inputs (raw material, wages) falls
|
Cost of
production falls
|
Raw material
become cheaper
|
11
|
Rate of tax
falls
|
Cost of
production falls
|
Government
is imposing less tax
|
12
|
Cost of
production falls
|
Supply
increases
|
Production
becomes profitable
|
13
|
Backward
Technology
|
Cost of
production rises
|
Cost
consuming
|
14
|
Price of
inputs (raw material, wages)increases
|
Cost of
production rises
|
Raw material
become costlier
|
15
|
Rate of tax
increases
|
Cost of
production rises
|
Government
is taking more tax
|
16
|
Cost of
production rises
|
Supply
decreases
|
Production
becomes less profitable
|
17
|
Increase in
demand is less than increase in supply
|
Price will
fall
|
Competition
among sellers outweigh Competition
among buyers
|
18
|
Increase in
demand is more than increase in supply
|
Price will
rise
|
Competition
among buyers outweigh Competition among sellers
|
19
|
Increase in
demand is equal to increase in supply
|
Price will
remain same
|
Competition
among buyers balances Competition among sellers
|
20
|
Inputs used
in production are increased
|
MP first
rises then falls even becomes negative
|
Law of
diminishing marginal product
|
21
|
MP first
rises then falls even becomes negative
|
MC becomes
‘U’ shaped
|
MC is ‘U’
shaped due to law of diminishing MP
|
22
|
AR(Price)
constant
|
MR(net
addition to TR) is constant
|
AR =MR in
perfect competition
|
23
|
Creation of
liabilities
|
Capital
receipts
|
Borrowings
|
24
|
Reduction in
assets
|
Capital
receipts
|
Disinvestment
,recovery of old loans
|
25
|
Creation of
assets
|
Capital
expenditure
|
Buying of
assets
|
26
|
Reduction in
liabilities
|
Capital
expenditure
|
Paying off
debts
|
27
|
Foreign
exchange rate increases
|
Value of
domestic currency falls
|
Inverse
relationship
|
28
|
Foreign
exchange rate decreases
|
Value of
domestic currency rises
|
Inverse
relationship
|
29
|
Foreign exchange
rate increases
|
Foreign
goods become costlier
|
Imports will
fall, demand for foreign exchange will fall.
More Rupees than earlier are needed to buy one dollar. |
30
|
Foreign
exchange rate decreases
|
Foreign
goods become cheaper
|
Imports will
rise, demand for foreign exchange will rise.
Less Rupees than earlier are needed to buy one dollar. |
31
|
Value of
domestic currency rises
|
Our goods
become costlier for foreigners
|
Exports will
fall, supply of foreign exchange will fall
|
32
|
Value of
domestic currency falls
|
Our goods
become cheaper for foreigners
|
Exports will
rise, supply of foreign exchange will rise
|
