1.ELASTICITY
In the
previous classes we got the idea about elasticity which describes to be as with
the fall in the price of any product the demand for the goods generally rises.
There are two types of Elasticity –a) Elastic and b) Inelastic.
1.a. Elastic
Example: Suppose a person went to buy a particular vegetable. When he
found out that the price is high he will look for a substitute for that
vegetable.
1.b. Inelastic
Example: In the Indian
market suddenly the price of the rice rises we will see the quantity of the
customers or buyers will not decrease as most of the them depend on that source
of good.
2.PRICE ELASTICITY
OF DEMAND WITH DETERMINENTS
From the previous part we get to know that with the fall in
the price of the product the demand for the good generally increases. Here in
case of price elasticity of demand we get to know that how much the quantity of
demand increases or decreases with respect to the rate of change of price.
2.a Availability of
Close Substitute
Example: We will find that in a certain shop,
we will be having both butter and ghee, so for a certain rise in the price of butter
the quantity of the customers will decrease and will tend to buy ghee as its
substitute. But we will find that with certain rise in the price of the egg the
quantity of the customers will not go down because there is no substitute for
eggs.
2.b. Necessities
versus Luxuries
Example: A person visiting his doctor finds
out that there is certain rise in the price of his Doctor’s fees, so what he
can do over here is that he can reduce the number of visit. Similarly, if the
person finds that travelling by plane will cost more than train, then the
person will tend to travel by train.
3.UTILTY
Utility generally means to be as the value or the usefulness which
the customers receives when he buys a product from that company.
3.a. Total Utility
Example: Suppose we are consuming ice-creams
from an ice parlour. On consuming the first ice-cream we will be gaining about
20 utils and after consuming the second ice-cream we again will be gaining 16 utils.
The total utility will be obtained be adding both the ulits or the satisfaction
gained.
3.b. Marginal
Utility
Example: Suppose we are consuming ice-creams
from an ice-cream parlour. On consuming the first ice-cream we will gaining 20
utils and after gaining the second ice-cream we will be gaining 36 utils as
total. The marginal utility can be calculated by subtracting the total ulits
with the second util.
4.OPPORTUNITY COST
Opportunity Cost describes to be as the cost which we could
have gained by utilizing the time. This generally determines between the scarcity
and choices.
Example: You went for shopping one fine day skipping the work
but later you realised that you could have gained more money, experience and
information if you had gone that day.
5.a. CONSUMER
SURPLUS
The consumer surplus generally defines to be as the
difference between the price consumer is willing to pay and the consumer
actually pays.
Example: You went to a shop to buy a gift for
your friend and your budget was 800 bucks. The gift you selected was about 1500
so you started negotiating with the shopkeeper and finally it went down to
about 700 bucks. So yours consumer surplus is 700 bucks.
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