Concepts Of Economics

Law Of Diminishing Marginal Utility-

The law states that, the more of a good that one obtains in a specific period of time ,the less the additional utility derived from an additional unit of the good.

For eg -
• If we watch a movie for the first time,the utility derived from it is the maximum. If we watch the same movie again and again ,the utility would keep decreasing each time.

• if you are hungry and then you order a pizza the first slice that you eat gives you maximum satisfaction and it will yield maximum utility to you .On the other hand if you keep having Pizza slices one after the other the additional utility keeps on decreasing.

Opportunity Cost-

The next best option or alternative available to us is known as the opportunity cost.

For eg-

• if a student decides to attend his extra class instead of going for a concert the missed concert is his opportunity cost.

• if a farmer decides to plant wheat ,the opportunity cost would be any other crop he could have planted like rice or pulses.

Law of demand -

The law of demand states that with the increase in the price of a good, the quantity demanded of that good decreases and vice versa ,other things remaining constant .

for example -

•if the price of onion increases, the quantity demanded for onion goes down or decreases considerably.

•If the price of Apple decreases, the people who usually don't buy apples will also start buying it because of its reduced price does leading to an increase in quantity demanded of Apple.

Law of supply -

the law of supply states that keeping other factors constant, if there is an increase in price of a good the quantity supplied also increases.

For eg -

•If the price of Titan watch increases the suppliers will be willing to sell more watches in order to maximize profit margins.

•If the price of oranges decreases in the market the suppliers will be unwilling to supply oranges into the market.

Marginal Utility-

The additional satisfaction that a consumer derives after the consumption of an extra unit of good or service is called utility.

For eg-

•The utility derived after the consumption of first pastry is more than the utility derived after consuming 5 pastries.

•The utility derived after reading a novel for the first time is more than the utility derived after reading it for the second time.