Demand and Supply for SEBI GRADE A 2020
Demand and Supply
For demand:
For Supply:
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IMPORTANT TOPIC ON ECONOMICS Characteristics of Consumption Function:
1. Most poor people find it difficult to save because they spend the major portion of their income on consumption goods. So income must reach a minimum level for any saving to occur. In other words, there is a break-even level of income. It is the level of income at which households spend all of their income on consumption goods, neither more nor less, i.e., at which saving is zero.
2. Below the critical (break-even) level people plan to spend in excess of their current income.
This can be done in two ways:(a) Either by borrowing or(b) By dissaving, i.e., by spending out of wealth accumulated in the past.However, there is a limit to the extent to which this process can go. People cannot consume indefinitely by borrowing or by reducing the stock of wealth. Since the stock of wealth is limited it will get exhausted sooner or later. This is why this type of consumption behaviour is unlikely to be observed in the long run.
3. Once income crosses the break-even level, people plan to consume only a portion of their income and to save the remaining portion of it.
4. If income increases (decreases), consumption spending will also increase (decrease) though not proportionately. For example, if India’s national income increases by Rs. 1 crores per annum consumption spending of all households might increase by Rs. 80, 00,000 and saving by Rs. 20, 00,000.
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