The goods which have positive income effect is said to be normal good. i.e whose demand goes up when the income goes up. Thus there is positive relation between Income and demand for normal goods. Income demand curve of normal goods slopes upward leftwards. It may be shown as under:

The goods, which are of inferior quality good and constitute a major part of total consumption. These goods have negative income effect i.e. when the demand goes down the income goes up. Thus there is a negative relation between income and demand for inferior goods. Income curve of inferior goods slopes down rightwards as shown in the following figure:

A monopoly (from the Greek language  monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a product or service, in other words a firm that has no competitors in its industry.
Following are the thre main features of monopoly market:
Ø       Only one firm in market
Ø       No close sustitute of the product
Ø       Strong barriers to entry
Entry of new Firms:  Under monopoly no new firm can enter the industry. There are strong barriers which restrict new firms to enter the industry. There is only one firm producing the producing the product. The firm may enjoy control over raw material, patent and legal protection.

We know that every economy has limited resources, which can be used to produce different combination of goods and services. If we make our economy very simple with only two choices then Production possibility curve is a curve which shows all possible combinations of two goods that can be produced by making full use of given resources and technology. Suppose an economy decides to produce only wheat and cloth. If all the resources are used for the production of wheat only then 100 lake tones of wheat can be produced. Or all resources are used for the production of cloth then 4,000 bales of cloth can be produced. Between these two extremes there can be many combinations, which can be produced. These can be shown by a schedule.

The PPC shifts to the right only if there is growth of resources. In such case the production possibilities of both the commodities will increase.

Average propensity to consume refers to the ratio of aggregate consumption expenditure to aggregate income thus
APC= Consumption
           Income
Marginal Propensity to consume  refers to The proportion of income that is consumed out of additional income thus
MPC=

The value of APC may be greater than one when at low level of income consumption exceeds income.

Gross National Disposable Income = National Income+ Consumption of fixed Capital +Net indirect taxes +Net current transfers from rest of the world
     = 3,000 +150 +250 +300
     = Rs 3700 crores

Marginal Propensity to consume =0.8

Multiplier=1/(1-MPC)

Total Increase in income= Increase in investment x Multiplier

=400x5
=RS 2,000 crores
Increase in consumption expenditure=Increase in income x Marginal propensity to consume
=2,000x0.8
=Rs 1,600 crores

The ratio of total saving to total income is called APS. It is that part of total income which is saved. Whereas Marginal Propensity to save is the ratio of change in saving to change in income. It is that part of additional income which is saved.
The value of APS can be negative when consumption expenditure exceeds income. At low level of income, consumption is more than the income and saving is negative. For example, If income is Rs 1,000 and consumption expenditure is Rs 1,200 then savings is Rs -200 or there is dissaving.

                     APS =

                          MPS=

According to total expenditure method, the price elasticity of demand can be measured at the following points-
1) If a fall in price leads to increase in total expenditure or rise in price reduces total expenditure the elasticity of demand is more than one (ed>1).
2) If a fall or rise in price does not cause any change in total expenditure elasticity of demand is equal to one (ed=1).
3) If a fall in price reduces total expenditure or rise in price increases total expenditure the elasticity of demand is less than one (ed<1).
The demand is said to be inelastic when a fall in price reduces total expenditure or rise in prices increases total expenditure.

Changes in marginal revenue affect total revenue directly. Total Revenue increases so long as marginal revenue is positive. Total revenue is maximum when marginal revenue is zero. Total revenue decreases when marginal revenue is negative. We can explain the relationship between total revenue and marginal revenue with the help of the following table -