9. Define VALUE.
Value is the power of a commodity to command
other commodities in its exchange. Value
expresses the relationship or ratio between two
commodities. An article possessing utility may or
may not have value but no article can have value
unless it possesses utility
Engels Law of consumption.
Dr. Engel divided the families at Saxony in
1. the labor class
2. the middle class
3. the well to do class
Comforts vs. Luxuries.
Comforts: The articles which give
appreciable pleasure and also increases
consumers efficiency slightly; while their
non-consumption will not cause much pain
or decrease actual efficiency are known as
comforts and are necessary for a decent living
e.g., good shoes and woolen clothes etc.
The main items of expenditure were classified into the
following five groups
Luxuries: Luxuries are those articles whose
consumption affords very great pleasure, but
does not contribute to our efficiency and
whose non consumption neither causes any
pain or decreases our efficiency e.g., costly
He summarized that as income of family increases
Wealth is a synonym with economic goods.
Wealth consists of commodities which are
Three attributes of wealth
Necessaries are those wants which are of
very primary importance and if they remain
unsatisfied, acute pain is caused and
satisfaction is necessary for the preservation
of life, efficiency or social prestige.
a. Necessaries of existence
b. Necessaries for efficiency
c. Conventional necessaries
heat, light, and fuel
Education, health, servants and
i. The percentage of expenditure on food
ii. the percentage expenditure on clothing ,
heat, light, and fuel remains the same and
iii. The percentage expenditure on education,
health and servants etc., increases.
Economics is defined as a “social, positive and
normative science and art, which studies those
activities of social, real and normal beings,
which are related to the Consumption,
Production, Exchange and Distribution of
1. What is ELASTICITY OF DEMAND?
Explain its types and causes.
(Tara Chand PgNo: 26)