Saturday, August 18, 2018

Economics Principles in Real Life Incident.

Economics Principles in Real Life Incident



During last winter vacation, I went to Esplanade ( Kolkata ) for shopping. After reaching there I went to a shop to buy watch. Among all the watch the shopkeeper showed to me. There was one Fast Track watch I want to buy. The price of that watch was Rs. 2000 which was out of my budget. So I started to bargain and decided to pay Rs. 1700 for the watch. At last the shopkeeper also agreed and I paid Rs. 1700 for the watch.

After buying the watch I went to McDonald’s to have my lunch over there. So after reaching there I ordered 3 Mac Egg Burger. After having the first burger which gave me great satisfaction and great utility. Now after having the second burger, the utility was less than the first one. Again after having the third one the utility was less than the second one. Like this if I want to have 2 or 3 burgers more the marginal utility derived from each additional utility declines and ultimately negative.

So here from my above real life example I can relate to 2 economics principles:

  1. Consumer Surplus- The actual price of the watch was Rs. 2000. After bargain I paid Rs. 1700. So Rs. 300 is the Consumer Surplus.
  2.  Law of Diminishing Marginal Utility- After buying watch as I went to McDonald’s and ordered 3 burgers. After having the first burger I got great satisfaction or utility. Then after having the second one the utility was less than the first one. Again after having the third burger the utility was less than the second one. Like this the marginal utility derived from each additional utility declines and ultimately negative. This is called Law of Diminishing Marginal Utility.



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