Concepts of Economics in Various Situation

Situation 1

To analysts, Indian industry will be able to take advantage through offering products at low prices

Concept- Law of Demand

Justification- Law of Demand states that other thing remaining constant, the quantity demanded of a commodity increases when price decreases and decreases when price increases. While Nestle’s Maggie was dominating the Indian market, ITC played the strategic move by reducing the price of their product (Yippee) by ₹2 to attract more customers. The result was as such that their sale of the product increased drastically.

Situation 2

We see more and more domestic tourists visiting beaches rather than religious places as seen earlier.

Concept- Incentives

Justification- People respond to Incentives. Now a days many tours and travels provide huge discounts or cashbacks in booking of any travelling Packages, they mainly target customers who loves to travels to exotics places for spending their vacation. Companies like MakeMyTrip and Goibibo provide huge discounts and cashbacks on travelling destination like beach places rather than religious place. Due to the discounts and cashbacks people tends to respond to this Incentive and travel to beach places more than religious place.

Situation 3

Many star hotels routinely offer unlimited buffet meals.

Concept- Law of Diminishing Marginal Utility

Justification- Restaurant chains like Barbeque Nation often provide unlimited food scheme to attract customers. They are very well aware of the Economic concept ‘Law of Diminishing Marginal Utility’, where others things remaining constant, addition of single unit of good consumed increases the utility derived from it initially but decreases eventually. In this case consumer begins to eat and derive utility from the addition of food consumption but it eventually starts decreasing from the consumption. Barbeque Nation according to the assumption how much a consumer can eat and set their price accordingly to earn more profit.

Situation 4

Theatre artistes/performers performing in multiple cities/events.

Concept- Opportunity Cost

Justification- People tends to analyse the situation where they face trade off by cost benefit analysis and responds to only those things where benefit over cost is higher (i.e, Opportunity cost). Opportunity Cost is the extra benefit over the next best altenative present in the market. Big celebrity like Priyanka Chopra went to Hollywood because of the same reason, when she received an opportunity from Hollywood she analysed the situation where she will get more benefit whether in Bollywood or Hollywood. The result was in favour of Hollywood, that’s why she opted for Hollywood.

Situation 5 

Increased usage of combination of skilled labour and technology is believed to result in increased output in manufacturing industries.

Concept- Production Function

Justification- Production Function is a process in which to maximize the output ‘Q’ a firm produce for every specific combination of inputs. Big Companies like Tata always depend upon various factors of production rather than focusing on only one factor. They believe in increase usage of combination of skilled labour and technology will increase the output. Tata increased their factor of production by 11% that resulted in increase of output by 6.2%.