1. 1 Law of demand
Law of demand states that keeping all other things constant,
when price of a good increases, quantity demanded for the particular good
decreases. In other words, law of demand is an inverse relationship between
price of a good and quantity demanded for that good.
Example: I am a regular consumer of KFC. But whenever it
comes to their price, KFC charges a very high service tax with the bill which
will crunch your pockets. Therefore I used to wait for the wednesday offers.
KFC had some amazing offers on Wednesday which they would sell at half the
price of the actual price. On other days the KFC 5 in 1 meal retails for Rs.209
inclusive of taxes, but on Wednesday it costs for only Rs 175. As a customer I would
be more delighted to visit KFC at only Wednesdays where I can eat 2 meals at
only Rs 350. Therefore whenever the meal costs me Rs 209 I only go for a single
meal, but whenever I go to KFC on Wednesday I would have 2 meals with an extra
crunch of chicken popcorn.
2. 2 People face trade- offs
To get something you want, you have to give up an
opportunity cost for the same.
Example : There are two options available (a) either I can
watch a movie or (b) I can go out with my friends. Both the options provide
different net benefits. Option A : Movie has the net benefit of 600 units and
option B : Going out with friends has a net benefit of 800 units. The confusion to select an option is the trade
off we experience. This is resolved using cost benefit analysis – which selecting
the option with higher net benefit, hence we select Option B here as it offers
a marginal benifit of 200 units , and the ost that we give up for the same “600
units” is the opportunity cost of selecting the option B.
3.Law of Diminishing Marginal Utility :
Law of diminishing marginal utility states that with the
consumption of every additional unit of a good the additional utility derived
from each successive unit decreases.
Example: I went to Dominos with my friends. I ordered one
whole medium pizza for myself as I was very hungry. As soon as our order
arrived I was the first one to jump into the pizza and when I had the first
bite, It was a feast to my empty belly. I derived the maximum satisfaction as I
was starving. Therefore I ate the first slice with utmost satisfaction. When it came to the second slice, I was still
hungry but not as till the first bite. But as soon as I came to the third slice
I became a bit conscious as i felt as if my tummy was full. Therefore when it came to the 4th slice, i was totally full but still i didn't want to waste it therefore i ate it. This is where my marginal utility derived from the 4th unit went 0. after that when my friends forced me to eat the 5th slice, i completely refused to it as the condition of negative marginal utility was happening.
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
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
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