Dismal Science in a nut shell

LAW OF DEMAND:
When the price of a good increases the quantity demanded of that particular good decreases, Similarly when the price of that good decreases the demand increases.

The relationship which is present in the form of text is called Law of Demand.

Demand
-tastes
-numbers & price of substitute goods
-numbers & price of complementary goods
-income
-distribution of income
-expectations
-information asymmetry

Supply:- willingness and ability of the producers to offer the goods in the market for sales at various prices.

Demand:- Consumer's desire, ability and will to purchase goods at various prices.

Example 1: We used to buy 10kg sugar when its price was 20/- per kg. suddenly sugar price rises to 50/-per kg then we decrease our quantity of buying sugar to 5kg.

Example 2: Every Diwali I buy 10 rockets,20bomb & 30 lightning candles, but this Diwali the price of fireworks are costlier than before so I bought 7 rockets,10bombs &20 lightning candles.

Consumer & Producer Surplus:

Consumer Surplus: - we can say that the difference in price which consumer is willing to pay and which consumer actually pays is called as consumer surplus.

Example 1: I go to a shop to buy carpet for my guestroom, the original price of the carpet is 3000 but my budget was 2500, After lots of bargaining shopkeeper agree to give carpet in 2400.

2500-2400=100

So rs100/- is consumer surplus.

Example 2: I want to buy a mobile hardly I can spend 15000 in any mobile. I bought a mobile for 13000, so 2000 is my surplus.

Producer Surplus: - The difference between the price which producer is willing to sell and the price which he actually sold is called producer surplus.

Example 1: I have a marbles & tiles shop one customer came to me for buying 20box of marbles for his home. The price of the marbles was 30,000 /- I am ready to give all the 20 box of marbles at 28000/- but the customer offers me the price of 29000 so 1000 is my surplus (producer surplus).

Example 2: I am selling Chicken one customer give an order for 10kg chicken, todays rate per kg chicken was rs120. The price for 10kg chicken was 1200/- customer paid 1300 for 10kg. rs100 is producer surplus.

Utility

·                     Ever consumers have different tastes and preferences in which rate of marginal utility diminishes depend upon.

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·                     Principle of diminishing marginal utility, the more of the good that contain in a specified payoff time, the less the additional utility derives from the additional units of goods.

Shorter the time period<---->faster the marginal utility decreases.

Example 1: I return to home after playing cricket and starving due to hunger my mom gives me 7 chapattis I eat 5 chapattis immediately because I was hungry but after5 chapattis I start losing my interest in chapattis.

Example 2:  My mom bought apple juice for me and used to give me daily at first I like the taste of juice and drink everyday but after 2 weeks my interest start diminishing for apple flavour juice.

Opportunity cost

The benefits we give up in order to get something else is called opportunity cost.

Example 1: I have rs500 in my pocket I want to buy magazine but I buy economics book because I have to prepare for my upcoming economics exams.

Example 2: I go to a shop to drink juice there are two flavours of juice banana and chocolate, I choose banana and I have a opportunity cost for chocolate flavour.

Scarcity

There are limited resource and unlimited wants, and we have to make right choice.

Example 1: Earth is cover with 70% of water but only 2%of water is fresh 744.21crore + peoples need fresh water to drink, so everyone will not get fresh water.

Example 2: coal is used to create energy many industries need lots of coal for their productions but source of Coal is very limited.