LAW OF DEMAND
The Law of demand states that price and quantity demanded of
a product are inversely related,
i.e., When the price decreases demand increases and when
price increases demand decreases, (other factor remains constant).
Examples
· At IBA students are not allowed to wash clothes
and there are two laundry, one laundry inside the campus another one is outside the campus, since inside one
started charging a higher price so
student reduced going to campus laundry and they shifted to the outside laundry,
i.e., when price increases demand decreases.
· While travelling form Lakshmipura to J.P Nagar
we prefer to travel in UBER when price falls rather than availing bus which
leads to increase in demand in UBER, i.e., when price decreases demand
increases.
LAW OF SUPPLY
The Law of supply states that a rise/fall in price will
induce the sellers to increase /decrease the quantity supplied (other factors
remains constant), i.e., supply is directly related to price of that product.
Examples
· When Nipah virus got spread in Kerala people
stopped eating fruits in Kerala and also in neighbouring states like Karnataka
,Tamil Nadu, etc. this lead to fall in demand of fruits and the price of fruits
got reduced for which seller reduced their supply of fruits in all this
regions, i.e., when price falls supply of products decreases.
· When fans of the CSK cricket team who won the
IPL match of 2018. The week before the final game, t-shirts and other items
with the team logo were sold at typical prices that were equivalent to the
prices of products. This lead to increase in demand and there is a run on all
of the team's merchandise. Some retailers double the price on the products and fans will
continue to buy the product in this situation seller increased their supply to
gain more profit and sell more products, i.e., when price rises supply of product
increases.
CONSUMER SURPLUS
It is difference between the price consumer is willing to
pay and consumer actually pays for consumption of particular product.
Examples
· While buying a packet of chocolate form DMART I was
plaining to pay 200 rupees but the seller gave me a discount and asked me to
pay 140 rupees. I was willing to pay 200
rupees for the chocolate packet but I was delighted to get it for 140 rupees
only. Consumer surplus is the difference between the maximum amount a consumer
is willing to pay for the good and the price he actually pays for the good. In
this example given above, the consumer surplus is 60 rupees (Rs200 – Rs140).
· Last day I went to a dhaba at Lakshmipura and I odered a chicken kabab without asking the rate which was too good and tasty and I thought of paying 120 rupees for one plate but while paying the bill I saw the cost charged is just 60 rupees only. In this situation cunsumer surplus is 60 rupees (Rs120-Rs60).
OPPORTUNITY COST
Opportunity cost is the highest valued alternative forgone
whenever a choice is made.
Examples
·
While buying my new phone I was comparing
between two phones Apple and Nokia. Reading all the reviews I choose apple. I choose
apple over Nokia.
·
Before purchase a new bike I compared between two
company Yahama and Honda after test driving and on the basis of price, features I choose Honda bike
over Yahama bike.
DIMINISHING MARGINAL UTILITY
The law of diminishing marginal utility states that the more
of a product the consumer has, the less will be the marginal utility.
Examples
· We love to drink orange juice. Last day I drank
a full glass of orange juice it was tasty and derives a great marginal utility but
after drinking the second and third glass the tastes falls and the marginal
utility falls rapidly.
- We all love wear new dress. I bought one new dress for freshers it derives a high marginal utility but after buying two more dress for freshers day which is just a waste of money and it leads to fall in marginal utility.
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