5 concept of Economics
1) law of Demand
Law of demand states that there is an inverse relation between price and quantity demanded. In other words. If price of product increases demand will decreases and vice versa. Law of demand states movement along a demand curve rather than shift in demand curve. The law of demand may not work in case of Inferior goods and Giffen good. It will work in case of Normal goods.
For Example. Recently price of petrol has increased. This led to decrease in its demand as consumer started using more of public transport rather than personal convince which results in more costlier. So this show law of Demand, as and when Petrol price increases it's demand will decrease and vice versa..
2) Taste and Preference
One of the determinant of demand is taste and preference because this will directly or indirectly affect the demand. As Economist have defined Rational consumer are the one who think systematically and work accordingly. So Rational consumer will buy the products according to their taste and preference. As they will buy what they like it and not according to the demamd of the product because it will give satisfaction to consumer.
For eg As trends of clothes changes taste and Preference are also changing like girls would like to wear more of western clothes as compared to salwar suits. This is due to change of their taste and preference which will increase the demand of western clothes and decrease the demand of salwar suits.
3) Opportunity Cost
Opportunity cost is the cost of the next best alternative. If you choose one alternative over another, then the cost of choosing the alternative becomes your opportunity cost.
As Investors always confused with options about where to invest their money to receive the highest returns. In order to choose best options, they choose one which give them maximum benefits and that become the opportunity cost. For Instance After doing graduation, I had two options either to go with job or with furthur studies. I chose to do MBA that becomes Opportunity cosr.
4) Law of Diminishing utlity
It states that all else equal as consumption increases the Marginal Utility derived from each additional unit decreases. In other words The Mu of a commodity diminishes as the consumer consumes
more and more quantity of goods . MU is the marginal utility that results from the change in the Total Utility resulting from 1unit change in the consumption of a commodity per unit of time.
For Exampe; In the situation of starving when consumer recives one chappati that chappati will give him maximum satisfaction and the second chapati he eat will give him less satisfaction and this will go on and result can bn negtive also.
5 People respond to incentives
Investment is something to which people act. It is not always in monetary term, it can be qualitative also.People respond as and when they see any benifit in it. In the situtaion given in exam, Many star hotels offer unlimited buffet meals in order to attract more and more customer amd to get more benefit because people will definetly pefer to get more benefit. For Eg; If Big Bazar is providing 20% discounts on food products then consumer will defintely respond to that.
1) law of Demand
Law of demand states that there is an inverse relation between price and quantity demanded. In other words. If price of product increases demand will decreases and vice versa. Law of demand states movement along a demand curve rather than shift in demand curve. The law of demand may not work in case of Inferior goods and Giffen good. It will work in case of Normal goods.
For Example. Recently price of petrol has increased. This led to decrease in its demand as consumer started using more of public transport rather than personal convince which results in more costlier. So this show law of Demand, as and when Petrol price increases it's demand will decrease and vice versa..
2) Taste and Preference
One of the determinant of demand is taste and preference because this will directly or indirectly affect the demand. As Economist have defined Rational consumer are the one who think systematically and work accordingly. So Rational consumer will buy the products according to their taste and preference. As they will buy what they like it and not according to the demamd of the product because it will give satisfaction to consumer.
For eg As trends of clothes changes taste and Preference are also changing like girls would like to wear more of western clothes as compared to salwar suits. This is due to change of their taste and preference which will increase the demand of western clothes and decrease the demand of salwar suits.
3) Opportunity Cost
Opportunity cost is the cost of the next best alternative. If you choose one alternative over another, then the cost of choosing the alternative becomes your opportunity cost.
As Investors always confused with options about where to invest their money to receive the highest returns. In order to choose best options, they choose one which give them maximum benefits and that become the opportunity cost. For Instance After doing graduation, I had two options either to go with job or with furthur studies. I chose to do MBA that becomes Opportunity cosr.
4) Law of Diminishing utlity
It states that all else equal as consumption increases the Marginal Utility derived from each additional unit decreases. In other words The Mu of a commodity diminishes as the consumer consumes
more and more quantity of goods . MU is the marginal utility that results from the change in the Total Utility resulting from 1unit change in the consumption of a commodity per unit of time.
For Exampe; In the situation of starving when consumer recives one chappati that chappati will give him maximum satisfaction and the second chapati he eat will give him less satisfaction and this will go on and result can bn negtive also.
5 People respond to incentives
Investment is something to which people act. It is not always in monetary term, it can be qualitative also.People respond as and when they see any benifit in it. In the situtaion given in exam, Many star hotels offer unlimited buffet meals in order to attract more and more customer amd to get more benefit because people will definetly pefer to get more benefit. For Eg; If Big Bazar is providing 20% discounts on food products then consumer will defintely respond to that.
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