Chapter 2 Business Economics

Jul 17, 2026

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Chapter 2 “Theory of Demand and Supply” in Business Economics presents core consumer-demand concepts for CA Foundation learners. It explains wants, utility, and the cardinal approach using total and marginal utility, including the law of diminishing marginal utility and its exceptions such as hobbies, abnormal persons, and indivisible goods with a caution about later-stage changes. It develops consumer equilibrium for single and two products, deriving how price changes alter quantity through marginal utility–price equality and linking equilibrium to the downward sloping demand curve. It also states assumptions and limitations for applying the law of diminishing marginal utility, including homogenous and standard units of consumption.

LanguageEnglish

CategoryExam

FormatPDF

Pages54

Reading Time2 h 16 min

Knowledge Portal BUSINESS ECONOMICS FOR CA FOUNDATION NOV 2018 CHAPTER 2: THEORY OF DEMAND AND SUPPLY By CA SANCHIT GROVER CA SANCHIT GROVER (Senior tax consultant with Big 4 ﬁrm) About the Author Completed his CA Course securing place in Top 6 All India Ranks-both at IPC and CPT level Currently associated with Ernst & Young (one of the largest consultancy ﬁrms globally in the ﬁeld of Tax Consultancy) Wide range of experience in handling tax ralated matters (both direct tax and indirect tax) for clients cutting across different sectors Successfully handled GST Implementation projects for various Multi National Clients Experience in handling issues related to UAE VAT and Australian GST Speaker at various seminars on Taxation and Economics What diﬀerentiates us from Others Discussion on Real Life Practical Issues with each Topic Use of tables and Flowcharts to summarize all Important Topics Interesting Learning techniques to grasp complex Complete Coverage of entire ICAI Question Bank including RTPs and addtional questions on ICAI website Revisionary Video & Voice Clips for Last Day Preparations Last Theory of Demand and Supply This Chapter has been primarily divided into the following 3 units:- Unit 1:-Theory of Consumer Behaviour Unit 2:-Theory of Demand Unit 3:-Theory of Supply 2.1:-Theory of Consumer Behaviour What to Study in this Chapter Concept of“Wants” in Economics | Meaning | 􀀹 All desires, tastes and motives of human beings are called wants in Economics. 􀀹 Wants may arise due to elementary and psychological causes. 􀀹 Since the resources are limited, we have to choose between the urgent wants and the not so urgent wants | | | | | --- | --- | --- | --- | --- | | Features of‘Wants’ | All wants of human beings exhibit some characteristic features:- 1) Wants are unlimited in number. They are never completely satisfied. 2) Wants differ in intensity. Some are urgent, others are felt less intensely. 3) Each want is satiable. 4) Wants are competitive. They compete each other for satisfaction because resources are scarce to satisfy all wants. 5) Wants are complementary. Some wants can be satisfied only by using more than one good or group of goods. 6) Wants are alternative. 7) Wants are subjective and relative. 8) Wants vary with time, place, and person. 9) Some wants recur again whereas others do not occur again and again. 10) Wants may become habits and customs. 11) Wants are affected by income, taste, fashion, advertisements and social customs. 12) Wants arise from multiple causes such as natural instincts, social obligation and individual’s economic and social status | | | | | Classificati on of ‘Wants’ | In Economics, wants are classified into three categories, viz., necessaries, comforts and luxuries. | | | | | | | Necessaries | Necessaries are those which are essential for living. Necessaries are further subdivided into:- necessari

Jul 17, 2026

Upload by Violet