.Law of Demand:
When the
price for the product increases, the quantity demanded for the same decreases.
Accordingly, when the price for the commodity decreases, the quantity demanded
for the same increases.
Assumption: All other factors remain constant (Ceteris
Parabus).
Example: I used to
have 10 Maggie packet per week when the price of Maggie goes high I reduced
eating Maggie to 5 packets a week.
Diminishing Marginal Utility:
As we increase the
consumption of a commodity the utility derived from each additional unit decreases.
Example: As IBA
was not allowing Non-Veg food, I was so eager to eat some non-veg on Saturday.
I ordered for chicken tandoori, the first piece give me high level taste and I
ate two more pieces but at the third piece I feel that the taste and my eagerness
to eat chicken was not same as when I took the first piece.
People Respond to Incentives:
People always
respond to incentive because they want to save their money. An Incentive is
something that induces a person to respond to money.
Example: As
Vaishanavi hotel gives 10% offer for IBA students, on every weekends I go there
with my friends than preferring any other hotels.
Utility:
The satisfaction we get after using any product.
It can be any type of product.
Example: Today, I went
to KFC for having food, the satisfaction I get from having fried chicken is
known as Utility.
Opportunity Cost:
The benefit one misses by
selecting some other alternatives is known as opportunity cost.
Example: To study
PGDM I give up my job in TCS
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