Economics when applied to real life sounds beautiful. this blog is for those students who are discovering the different facets of economics applications and want to share their discoveries.
Friday, August 31, 2018
MY EXPERIENCE WITH CANTABIL
The Cost of Something is what you give up to get it
As people face Trade off , decision making requires Cost, Benefit analysis. It requires comparing of cost and benefits of alternative products and chosing the one which is more beneficialLy the cost of giving something.
For Example. After doing my B.COM. I had two options either to go for job or for post graduation. I chose Post Graduation over Job so I gave up cost of Job in order to get Post graduation degree.
Rational consumer used to analysis the product and its opportunity cost. So, he choose the next best alternative. the one he chose requires the cost of something that he has to give up. For instance : The cost of pizza and Burger with Coke , the opposite would be the enjoyment of delicious pizza.
This concept is important for learning behaviour of consumer. Every Producer keep this concept in mind while analysing the Market. This concept applies in day to day life.
Decisions requires comparing cost and benefits of alternative.
whether to go to college or to work?
Whether to study or tu go on a date.?
Whether to go to to class or sleep in?
This concept depends upon many other factor also.
So Economists consider it as valid cost for decision making.
How Future Group Privilege Card acted as an Incentive for purchasing products
How income effects our necessities
Income Elasticity of Demand
Positive Elasticity of Demand:
Negative Elasticity of Demand:
Cost Minimization by Isoquant Curve
Saturday, August 25, 2018
Mid term taught me economics
The sudden announcement of exam made me shocked because I was not at all prepared.
With the decreasing duration before exam,my demand for study was increasing.
FIVE SHADES OF ECONOMICS
RESPOND TO INCENTIVES~
OPPORTUNITY COST~
SUPPLY CURVE~
MARGINAL RATE OF SUBSTITUTION~
LAW OF DEMAND~
# 5 CONCEPT # OF #ECONOMICS.
Economics and Experiences
To analysts, the industry will be able to take advantage through offering products at low prices.
Many Star Hotels routinely offer unlimited buffet meals.
We see more and more domestic tourists visiting beaches rather that religious places as seen earlier.
We often see keen interest especially among young men and women to participate in fashion shows?
Often, unseasonal price fluctuations are observed in the case of Fruits.
Exmaple of Economics Concepts
1.Law Of Demand:
Often,unseasonable price fluctuations are observed in case of fruits.
Explanation: The demand of the fruits gets drecease and the supply of the fruits may increase in the unseason time so that the prices of the fruits gets drecreases.
2. Opportunity Cost:
3.Law Of Demand:
4. People Respond To Incentives:
Many star hotels routinely offer buffer meals.Explanation: Providing buffer by star hotels at a rate of Rs 1200, in which people gets variety of vegetable and breads instead of eating food of Rs 1200 with linited dishes. They provides some extra food to people so, it is a exmaple of people responds to incentives
5. Law Of Diminishing Marginal Utility
REALIZING THE LIFE WITH ECONOMICS.
DAILY ECONOMIC
Concepts of economics
It states that when the demand of the good rises and the price falls. With all other things keeping constant. There are other things that can effect demand beside price. They are price of related goods or services, income, tastes.
Law of supply:-
It states that when the price paid by buyers for a good rises then supplier increases the supply of the goods in the market.
Law of diminishing marginal utility:-
It states the marginal utility derived from the consumption of additional unit goes on diminishing keeping the other things constant.
Opportunity cost:-
It is the next best alternative while making a decision. A choice needs to be made between several alternatives.
Utility:-
It refers to the satisfaction that an individual recives from consumption of good and services.
principles of economics with real life examples
4 Law Of Supply
Law of supply states that keeping all other things things constant when price of a good increases, the quantity of a good offered by the supplier also increases.\
Example: I used to go to Mad Over Donuts shop who used to offer some amazing donuts as well as cupcakes. As the name suggests, it was initially famous for the wide variety of donuts. After an year of it's launch in India it introduced cupcakes whose rice was initially higher. When we went to the shop we also wanted to try out the cupcake as it was freshly launched. When we had the first bite, the cupcakes were actually mouth watering and it was way better than the donuts they were offering. As a result, even it was sold at a higher price than the donuts, people usually came there for having cupcakes. As a result, they started producing more and more units of cupcakes and less units of donuts.
5 Utility
Utility refers to the satisfaction that we derive from consuming a particular good at a point of time.
Example: When we go and watch a movie, the satisfaction derived after watching the same is known as utility. The ratings we give to each movie is known as cardinal utility. After the ratings provided the movies of specific genre are ranked - the ranking done is an example of ordinal utility
Economic concepts and it's relations with practical examples
Example : I used to buy 1 dozen bananas at Rs 100 but when the price drops down to 50 rupees I bought 2 dozen bananas.
Principle of diminishing marginal utility: the more of a good that one obtains in a specific period of time, the less the additional utility derived from an additional unit of the good.
Example: When i will first consume the Laddu the utility derived will be higher but as i increase my consumption of laddu ,the utility derived from it will decrease.
Production possibility curve- it is a hypothetical representation of the amount of two different goods that can be obtained by shifting resources from production of one good to another.
Example - I have a garden in my house. In that I have grown various plants and flowers. But due to excessive rise in temperature of Lucknow, my plants got ruined. So I decided to grow my favorite vegetable for which I used production possibility curve for the best combination of crops to grow. I grew ladyfinger on 3/4th of the land and potato on the leftover land.
Inelasticity of demand: when the quantity demand doesn't change in proportion to price it is called demand elasticity.
Example - When the price of necessary goods changes, there is no or negligible effect of the quantity demanded. So when the price of TATA salt increased, my family brought the same quantity of salt what they used to bring earlier i.e. 1kg.
Shift in demand curve in realtion to substitute goods: when the price of substitute goods increases, quantity demanded for a given product increases.
Example: I used to buy lakme products but when the price of lakme product increases, i started buying Revelon product. With increase in price of lakme , the demand for Revlon product increased
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Economic concepts in our lives
Law of Demand
Changing Tastes and Preferences
Law of Diminishing Marginal Utility
Opportunity Cost
People respond to incentive
Economics amaze Me
The law of diminishing marginal utility states that when we consume a good or service the marginal utility which we get decreases with each additional goods or services.
for example:
People love going to circus cause as it amazes them what a human being is worth capable of. The Circus artists perform multiple events because the utility what the audience derived diminishes every time he watches the same show.
As the demand for goods increases there is a shortage of goods that is when demand for goods is greater than supply of goods. this results to the increase in price of the goods until there is an optimum supply of goods which is equal to the demand of goods.
for example:
Seasonal vegetables are always in demand. This high demand leads to shortage of seasonal vegetables. So as to decrease the demand of the seasonal vegetables the price rises until the demand is meet.
Opportunity cost is something which you give up when you face a tradeoff.
for example:
When you go to shop for buying a pair of shoes. And there you find a very beautiful pair of shoes which you have always wanted but its cost is a little expensive.
So you decided that you can manage somehow by decreasing few expenses for a month.
here the opportunity cost is the other thing which you sacrifice for the pair of shoes
Examples of economic concepts
E.g: As the price of apples grew the demand of apples reduced.
2. Diminishing marginal utility
Eg:Music Industry ( the more number of time we listen a particular music in a specific period of time the less additional utility will be derived).
3.Mobility
E.g: when a boy leaves his job and goes to a new country for a new job is known as mobility.
4.Supply curve
E.g:when the price of apples grew the supply of the apples grew in the market.
5.Utility
E.g.:After studying at IBA for more than one months I have learnt lots of concept on marketing.
Economics and various concepts
The concept of diminishing marginal utility states that the more of an item you consume within a given period of time the less utility you derive from each additional unit.
The law of demand states that when price of a product decreases the quantity of purchases increases therefore the sales volume will be higher.
Rational people think at margins states that while making choices people compare between the alternatives available and choose the one that gives more Marginal net benefit.
People respond to incentives states that when people are confronted with incentives they tend to react to it or try out the product.
The law of supply states that as prices increases the supply by the producer to the market also increases inorder to increase revenue.
FINALLY!!! No more Suspense...
pratical economical life situations
Example: There are 3 shops which gave me a correct product that I want. Shops A, B, and C. So here I am face trade-offs. Net benefit units from shop A is 1000 and from B shop is 800 units and from C shop 850. So I am choosing Shop A because shop A gave me more benefits comparison to other shops. The opportunity cost choosing A is not being choosing shop B and C.
2. Increased return to scale
Example: In a manufacturing industries when we want to increase the output we usages the combination of skilled labour and technology. That concept related to increased return to scale that believed that combination of skilled labour and technology helps to increase the output.
3. Price Mechanism
Example: With the increase in demand even if price increases people will buy. When a particular fruit has its season the demand for that fruit increases. So people will be eager to buy. So vendor increase the price of that particular fruit. On the other hand, when the season for that fruit goes demand for that fruit also decreases. So the vendors decrease the price in order to entertain the cash flow.
4. Law of Demand
Example: When the artists performing at different cities because of the increase in demand for their performance and according to law of demand is satisfaction of customers so that artists performing in different cities they are satisfying the demand of their fans.
5. Marginal Utility
Example: People see more and more tourists places rather than religious places because they more satisfaction get from tourists places. The facilities provided at tourists places are more than religious place and if consumer experience these facilities in a tourists place then he prefer going to tourist places rather than to a religious place.
SOME GENERAL CONCEPT OF ECONOMICS
Different Example Of Economics Concepts
Law Of Demand:-
Law Of Supply:-
Elasticity:-
Law Of Diminishing Returns:-
Customer Surplus:-
NOTION OF ECONOMIC CONCEPTS
LIFE FULL OF ECONOMICS
As we look into our daily life, we can see that, behind each and every spending and consuming behaviour of us, there is a concept of economics in it. How we take decisions to buy, how we spend, how much we spend, what benefits we get from that spending and are we satisfied from that spending? The changes in prices, in consumptions, in expenditures etc., all are related to one or the other concept or principle of economics. Let’s see some examples and which concepts of economics are involved it them:
1)PEOPLE FACE TRADE OFF:
For example, once my mother and I went to a buy a saree for my mother. That day, we actually spent 3 hours in the market just to buy a saree. We searched sarees in 5-6 shops. Then we finally got a saree of our choice. In this situation, we can see the very first principle of economics that is “People face trade-off”.
Trade-off means a decision that a customer take of buying one product and sacrificing other after comparing two or more goods that they want. In our situation, we have faced exactly the same confusion. All those saree shops were showing us the best quality saree with variety of colours and fabric from their collection. That was making us more confused. We were facing so much difficulties to come to a decision of choosing one saree among them. Few sarees were very good but were out of our budget. Then after searching in 5 to 6 shops we finally selected a saree under our budget after trading off of between so many sarees.
2)SUPPLY:
For example, we often get to hear about the news of live dance shows done by Bollywood celebrities. When the dates of these shows are out, the excitement level of people increases and ticket prices increases. Even at a high price, people are ready to buy the ticket. And the show organisers gain more and more profit. Then organisers are more willing to organise these dance performances to earn more and more profit.
Here in this case, we can see the concept of supply and its relation with price. Supply is the willingness and ability of the producer to offer to sale in the market. And supply and price has a direct relationship. When price increases, the quantity supplied also increases, and when price decreases, the quantity demanded also decreases. And in this case, as the price of dance shows ticket were increasing, the organisers were more willing to organise the shows.
3)INCREASING RETURNS TO SCALE:
For example, if a company increases the usage of skilled labour along with the technology, it is expected that there will be an increase in output in service industries.
Here, we can see the concept of increasing returns to scale. The increasing returns to scale concept says that output increases more than proportionately with the increases in the inputs. And in this case, skilled labours and technology are the inputs in production. And with the increases in their usage, the output is expected to be high.
4)COST BENEFIT ANALYSIS:
For example, if we want to open a mall. And there are 3 prospective locations namely A, B and C. Each location is offering us different net benefits. The net benefit units offered by location A, B, and C are 1000 net benefit units, 800 net benefit units and 850 net benefit units respectively. And now we have to the choose the location which gives us the highest net benefit.
Here we can see the concept of cost benefit analysis. For choosing the best location for our mall, we have to do the cost benefit analysis. As we can see, location A is giving us the maximum net benefit units of 1000, 150 more net benefit units from location C and 200 more net benefit units from location B.
So we will choose location A for the prospective location for our mall.
5)PEOPLE RESPOND TO INCENTIVES:
For example, Flipkart offers Flipkart fashion sale every year. In the sale, people get to receive thousands of variety of clothes and accessories with unbelievable discounts of 70%, 80% and even 90% on big brands. In this, we can see the economics principle of “People respond to incentives”.
By offering huge discount, Flipkart gives us incentives. And people positively respond to these incentives. And these sale becomes a huge success for Flipkart. People spend so much time shopping in these sale. These choose among the best and cheap product of good brands and gets the products in unbelievable prices.
Economics in my life
Lets start with:
LAW OF DEMAND
Higher price of good then lesser is the Quantity demanded and vice versa,in a defined time period.
Example: Petrol price, i used to drive 9 km to my college in Jaipur. Now whenever there is a hike in price i opt for pooling with someone or using public transport.Here when petrol price increases demand of petrol decreases. And when a low price is estimated ,we can see a long queue in front of petrol pumps.
UTILITY
Satisfaction derived from consumption activity.
Example: Mango season, the summer season. Satisfaction derived from the season's first mango tasted is utility to me.
LAW OF DIMINISHING MARGINAL UTILITY
As consumption increases the marginal utility derived from every additional unit keeps on declining.
Example: Now i will derive utility from that season's first mango. But as i start consuming more of mangoes the utility derived from each additional mango consumed will keep on diminishing i.e. Satisfaction will be less comparative to the first mango consumed.
OPPORTUNITY COST
In simple words, opportunity lost is opportunity cost.
Example: In IBA post lunch mess is closed on saturdays. The most buzzed restaurants, lets take two (i) Vaishnavi (ii) NH209
Now in vaishnavi a biryani will cost Rs.250 and in NH209 it will cost Rs.150.
Here from the choices NH209 is considered more of a valuable alternative choice .
It is important to note that opportunity cost is not only focused on monetary value but also time, pleasure, ambience etc.
LAW OF SUPPLY
Higher price of good results in higher quantity supplied.
Example: Cafe coffee day is the nearest hangout place from IBA, here the price of coffee is higher i.e. Rs.150 per cup. Still a number of customer including myself is attracted towards that high rated coffee.
Each action as some Economics
IMPACT OF SOCIETY /SOCIAL GROUPS ON PURCHASE INTENTIONS OF HOME BUYING- Consumers are the most important factor that will make any bus...
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Supply in elastic:if the supply is difficult to replace the product by a substitute goods then that is known as supply-in-elastic. Example...
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MARKET STRUCTURE: there are different market structures that can be characterized to an economy, without market structure any company ca...
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If the supply is easy to replace by multiple suppliers then it’s known as supply elasticity. Any unskilled worker is an example of supply e...