Because it's More than a Subject
What is Positive Economics? (The Science of “What Is”) Positive economics is the branch that describes and explains economic phenomena as they actually are or were, without any value judgments. It is purely objective and scientific, exactly like physics and chemistry. A positive statement can be: It only answers three … read more
Homogeneous and Homothetic function helps economists to explain how proportional changes in inputs affect outputs, and how income or scale variations influence decision-making. Economists often use mathematical functions to describe real-world economic behavior. A production function relates inputs to output, whereas a utility function relates goods to satisfaction. Two forms … read more
An isoquant (also known as an Equal Product Curve) is a curve that shows all possible combinations of two inputs, such as labor (L) and capital (K), that produce the same level of output. In simple terms, it represents different input combinations that yield an identical quantity of production. The … read more
Factors of production have been classified into four categories: land, labour, capital and entrepreneurship. Land in economics means all the natural resources available from air, water, from above the land surface and below it which can be used for production. Similarly, labour does not only mean physical exertion, but all … read more
The scarcity of resources relative to human wants gives rise to various basic problems, issues, or questions that must be solved by an economy if it is to fulfil its purpose. These basic economic problems are also called central economic problems. All these problems involve choices to be made by … read more
Law of demand states the relationship between price and quantity demanded by assuming “other things remaining the same”. When there is a change in these other things, the whole demand schedule or demand curve undergoes a change. In other words, these other things determine the position and level of the … read more
In day-to-day language, we often consider meaning of demand as desire. Desire means an urge to have something. In Economics, demand means a desire which is backed by willingness and ability to pay. For example, if a person has the desire to purchase a television set but does not have … read more
The law of variable proportion occupies an important place in economic theory. This law examines the production function with one factor variable, keeping the quantities of other factors fixed. In other words, it refers to the input-output relation when output is increased by varying the quantity of one input. When … read more
In the cardinal utility approach, the utility function was direct in the sense that the total utility was related to the quantities of different commodities and services consumed by a consumer at a given time. The direct utility function can be expressed as: The ordinary demand equations for the goods … read more
The consumer is assumed to be rational. Given his income and the market prices of the various commodities, he plans the spending of his income so as to attain the highest possible satisfaction or utility. This is the axiom of utility maximisation. In the traditional theory it is assumed that … read more