Consumer
Surplus
Consumer
surplus can be defined as difference between the price customer is willing to
pay and the price customer had paid.
Example 1:
A handmade
colt gun comes at the auction. Gun experts at auction have valued at not more
than Rs 1000.Bidding for the gun starts from Rs 100 and reaches up to Rs 980
which was offered by one of the gun expert. Therefore, it can be said that Rs
20 (Rs 1000-Rs 980) is consumer surplus.
Example 2:
A company
before initial public offering announces price range between Rs10 and Re 1.
After closure of the offer the company decides to fix the price at Rs 6. Therefore,
company allots shares to the person who applied @ Rs 6 and more. Number of
people who were willing to pay Rs 7 or more got the shares at lower price thereby
achieved consumer surplus.
Production
possibility Curve
Production
possibility curve is a hypothesis representing different amount of two different
goods that can produced by shifting labour and other resources from production
of one to another.
Example 1:
I am able to solve 2 problems on accountancy and 1 problem on statics per hour. I can
practice for 6 hours in a day therefore, i have the option of solving 12
problems of accountancy and 0 problems of statics. Or she can solve 6 problems
of accountancy and 3 problems of statics. Hence different possibilities can found
by shifting available hours between accountancy and statics.
Example 2:
A barber provides
two types of service: haircut and saving. He could give saving to 4 people and
haircut to two people in one hour. His shop is open for 12 hours therefore, different
possibilities can found by shifting available hours between haircut and saving.
Producer
Surplus
Producer
surplus can be termed as difference between selling price of seller and minimum
price at which a seller is willing to sell the product or service.
Example 1:
I had accidentally
purchased a stamp which had some incorrect spelling, therefore I kept it
as memory. But after some time I discovered it to be valued at Rs 3000 from
expert. When I listed it on ebay I got an offer of Rs 5000. I got surplus of Rs
2000 (Rs5000-Rs3000).
Example 2:
I bought 10 new Rs 5 note from a friend in
exchange of Rs 60. therefore he earned a producer surplus of Rs 60 because he received
from his father free of cost.
Opportunity
Cost
It can be
defined as a forgiven uses due to purchase of current item.
Example 1:
My father
had to invest huge amount of money in PGDM education which he might have used
in expansion of his business.
Example 2
I have to
invest time
on
studies instead I have the option of utilizing time to spend with friends or go
to relative’s place.
Diminishing
Marginal Utility
Diminishing marginal utility can be defined as
reduction in utility or satisfaction from successive consumption of similar
goods or service
Example 1:
When I see a
movie for 1st time I get great satisfaction but it keeps on reducing
on viewing the same movie over and over.
Example 2:
When I was
in 7 standard I was given “MilkBikis” biscuit every day in tiffin as result my
satisfaction reduced to such a level that I was not able to taste “Milkbikis “
biscuit for many years.
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