1) Trade-off
A situation in which you are giving up something in order to get
something is called trade-off.
Example 1.1-Two
years ago when I went to buy a car I was confused between Hyndai i10 and i20. Both the
cars have its own specifications. Atlast I ended up buying i10.
Example 1.2-During
my office days I remember that once I had an important meeting and on the same
day it was my parents’ 25th anniversary. After a lot of thoughts I
had to stay back to attend my meeting.
2) Opportunity cost
It is
defined as the cost of something which we are sacrificing to get something. In
other words trade-off creates opportunity cost.
Example 2.1-
Ref to 1.1
In example
1.2 when I bought i10 I sacrificed i20. With i20 I sacrificed the
specifications which i20 had. That is the cost which I sacrificed to get i10.
Example 2.2-
Ref to 1.2
In example
1.2 when I attended the meeting and sacrificed my parents’ anniversary I
sacrificed the enjoyment and entertainment which I could have in the party.
That is the opportunity cost.
3) Consumer surplus
It is
defined as the difference between the price that a consumer is willing to pay
and the consumer is actually paying. It is the satisfaction that the consumer
is getting on the product that he is not having to pay.
Example 3.1-
Two years back I bought my first car Hyundai i10. When I went to buy I thought
of not extending my budget more than 5 lakhs. But that time when I went to buy
I got a discount of 10% due to Hyundai-Tcs collaboration and after some
negotiations I got further discounts of 5%. I10 that time was 4.80 lakhs. After
discount I got it in 4 lakhs. I almost saved 80 thousands. That 80 thousand is
my consumer surplus.
Example 3.2- 7
months back I bought a new phone. I thought that I will not spend more than 20
thousand. When I went to a shop I saw many models out of which I found Samsung j7
pro to the appropriate one. J7 pro was coming in a price range of 18000. Upon that
the retailer gave a certain amount of discounts and I ultimately I got it in
17500. This is 2500 is my consumer
surplus.
4) Producer Surplus
It is the
difference between the the price that the producer is willing to sell and the
product actually sold.
Example 4.1-
Before buying the new phone I sold my old phone. I made up my mind that I would
sell my phone at rs 5000 but I dint reveal the price. My friend saw the phone
and after seeing the condition of my phone he was willing to buy it for 6000. The
extra 1000 Rs. That I made was my producer surplus.
Example 4.2- During
my engineering days after every semester we all used to sell our books. After 1st
semester since I was new to the system I did not have any idea about how much I
could get by selling the books. So I thought that I will sell those books at
atleast rs 500. But after going there I
sold those books at Rs 1500. So this Rs 1000 is my producer surplus.
5) Principal of
diminishing marginal utility
The more of
a good that one consumes in a specific period of time the less additional
utility derived from the additional unit. That utility derived from the
additional unit is called marginal utility and this diminishes with more
consumption of the particular goods within a specific period of time.
Example 5.1-After
attending 4 hours of lecture I was very hungry. So I went to CCD and ordered a
pack of cookies. When I had the first cookies it had a high satisfaction. When
I had the second one my appetite was getting more satisfied. After having the
third my stomach became almost full. When I was having the fourth one I was
getting less benefit and less satisfaction and the utility deriving from that
additional 4th cookies decreases.
Example 5.2-When
Bahubali 2 was released I went to watch the movie with my friend with great
enthusiasm. My friend liked the movie so much that he wanted to see that film
again. When he told me that he wanted to go again I refused him because after
watching for the first time that level of satisfaction or that utilty had
already decresed. So I could not watch for the second time.
No comments:
Post a Comment