Normal goods – the quantity demanded of such commoditiesincreases as the consumer’s income increases and decreases as the consumer’s income decreases. Such goods are called normal goods.

Giffen goods – a Giffen good is an inferior good which people consume more of as price rises, violating the law of demand.. In the Giffen good situation, cheaper close substitutes are not available. Because of the lack of substitutes, the income effect dominates, leading people to buy more of the good, even as its price rises.

Substitutes goods– substitute good for another kind insofar as the two kinds of goods can be consumed or used in place of one another in at least some of their possible usesn increase in price for one kind of good (ceteris paribus) will result in an increase in demand for its substitute goods, and a decrease in price (ceteris paribus, again) will result in a decrease in demand for its substitutes.

Complementary goods – A complementary good or complement good in economics is a good which is consumed with another good;if goods A and B were complements, more of good A being bought would result in more of good B also being bought and vice versa eg car and Petrol. If the demand for car increases then the demand for petrol also increases.

Economics : Art Or Science

Economics is both a science as well as an art. Economics involves developing policies and implementing those policies, which is an art in itself

Science is the relationship between causes and effects. Economics has theories, which describes cause and effect relationship eg. cause – fall in price and effect – increase in demand.

Economics is a positive as well as normative science

a.Positive Science (What is? What was? What will be?) – Actual happenings.

Examples:

• India is an over-populated country.
• Prices in Indian economy are constantly rising.

b. Normative Science (What ought to be? What ought to have been?)

Examples:
• Fundamental principle of economic development should be the development of rural India
• Agricultural income should also be taxed.
• There should be no unemployment in the country.

Difference : Micro and Macro Economics

Microeconomics studies subjects like

·         Microeconomics can be defined as the study of an individual.

·         Choices of individuals

·         E.g. consumption, investment, hours of work

·         Choices of Firms

·         E.g. how much to produce, what price to charge

·         The Determinants of Prices and Quantities in specific markets

·         Market structure

·         Market Competition ( what competitors are doing)

Macroeconomics studies subjects like

· Macroeconomics csn be defined as the study of aggregates or the study of economy as a whole.

· The performance of national economies, National income, Aggregate demand and supply

Long run growth and prosperity

· Why have some countries grown substantially while others remain poor?

· Short run booms and busts

· What determines unemployment and inflation

· Government policies to change performance