In practice, however, it is very difficult to assess costs, because of the difficulties of predicting the consequences of selecting a hypothetical alternative. E.g if the government opts to spend 20 million of tax revenue on improving welfare facilities for blind people in cities, it is virtually impossible to calculate the value of the satisfaction which could have been derived by, instead using the money on building a new school or college. Hence, for the majority of people the term cost simply means monetary cost.
Law of demand and supply:-Demand is the quantities of goods which buyers would take at various prices. In economics, the law of demand is simply thus: The lower the price of something, the more of it people will buy. This law assumes of course, that there are no offsetting changes, such as lower incomes, lower prices for other products, and so on. In other words there is an inverse relationship between price and quantities purchased. The higher the price, the less purchased; the lower the price, the more purchased.
The law of demand can also be stated in the words, arise in the price of a commodity or a service is followed by a reduction in demand and a fall in price is followed by increase in demand, if conditions of demand remain constant. The qualifying phrases and the condition of demand remained constant and are very important. If there is a change in fashion, customs or seasons the demand may change even though the price has not changed. In such cases, the conditions of demand have changed. A change in population or change in currency circulation or change in real income or change in distribution of wealth are also some of the factors which influence demand independently of price.
Changes in demand and supply:-The change is called extension or contraction of demand. There are however several other factors which can b View More »