*Elasticity:- elasticity is the measurement of how much a variable responds to a change in another variable.
Elasticity is one the most important concepts as it helps the producers/manufacturers to understand the market in an efficient manner and to take decisions accordingly.
Life examples:-
1. If Cadbury company raises the price of any of its products then it will affect the sales of that particular product.
Justification- here the company is raising the price which is one variable and sales is another variable,so here the company has to observe how is sales affected when the price is increased.
2. If a products value of any company goes down because of its low demand then it affects the supply which the company will make of that product in the market.
Justification- here we can see that value of a product goes down because of its low demand and supply is affected.
So as the value comes down the company has to decide how much cut short in supply should be done.
* Supply and Demand
Supply:- supply is a fundamental economic concept which describes the amount of goods and services available at a particular place.
It is important for the producers to make the goods and services available at the right place which makes convinent for the consumers to make the most use of it.
Life examples:-
1. Nestle company increases the supply of maggie in the market when the price per unit increases.
Justification- as the price is high the company wants to sell more and more number of products so supply is increased.
2. When the value of Nike shoes increases in the market the producer supplies more and more number of shoes in the market.
Justification- when the market value is high the producer wants to supply maximum number of shoes to sell them before the value comes down.
*Demand:- Demand is a fundamental economic concept which describes the willingness of a consumer to pay a price of a particular product. It is important for the producers to fulfill the demand of consumers with the aim of maximizing profits and keeping the cost of the product low.
Life examples:-
1. I phone X was priced high because of which the demand was low.
Justification:- the price of I phone X was too high so the consumers were not that keen on buying it as other companies were providing similar features at a comparatively lower price.
2. The demand of onions went down when it's price was at its peak.
Justification:- as the price increased drastically the demand came down and consumers did not buy it.
*Consumer Surplus and Producer Surplus
Consumer Surplus:- it is the difference between what consumers are willing to pay and what they actually pay for goods and services. A fall in market price of any product leads to an increase in demand which leads to consumer surplus.
Life examples:-
1. Santanu goes to a shop to buy a shirt. He pays rs900 for the shirt where he was willing to pay rs1000, so here the consumer surplus is rs100.
Justification:- Santanu could have paid 1000 for the shirt but he got the shirt for 900.
1000-900=100
2. Ajay goes to buy a burger of rs200 but instead he gets it in rs150.
Justification:- Ajay could have paid 200 for the burger but only paid 150.
Producer Surplus:- It is the difference between the price producer is willing to sell and the price at which the goods are sold. When the price of a any product increases it will increase the producer surplus and vice versa.
Life examples:-
1. Nestle company when started selling maggie they had different price ranges in mind but they at last sold for rs 12.
Justification:- Nestle company wanted it to sell Maggie at different prices but at last it was sold at rs 12.
2. A fruit seller wants to sell oranges at different price.
1st dozen- rs 200
2nd dozen- rs 300
3rd dowzen- rs 400
But he sells all of them at rs 300 because of different customers that come to his shop.
Justification:- the fruit seller had different prices for different dozen but at last sold it at different price because of customers.
*Consumer behaviour and Producer Behaviour
Consumer behaviour:- it is the study of behaviour of a particular consumer in what way they react to a particular product. The reaction of the consumer can be observed through the way of their purchase,use, experience and disposal of goods.
Life examples:-
1. Mc Donald's releases a new burger in the market with new taste. It depends on the consumer who much he/she likes the burger.
Justification:- if it suits the consumer's tastes, then it will gain more demand and popularity in the market.
2. Cadbury company has made products which are consumed by all age groups.
Justification:- Cadbury company has used the age parameter of consumer behaviour and made products which can be consumed by all age groups.
Producer behaviour:- It is means the type, quantity, quality of goods and services provided by the producer to its customers on the basis of consumer needs and wants, market trend.
Life examples-
1. Nike company wants to launch a new product in shoes category so it will look upon the needs and wants the new fashion going on in the market.
Justification:- Nike market will invent it's products based on above factors because it should fulfill the customers needs and the company should make profits out of it .
2. A hotel owner opens a new hotel in South Mumbai, with polished interior, different cuisine, etc.
Justification:- Here we can see that owner is opening a hotel based on the lifestyle of the consumers in that area and what are the tastes of the consumer.
*Opportunity cost:- in micro economics theory of opportunity cost or also known as alternative cost is a value, not a benefit of choice of the best alternatives.
Life examples
1. Suppose Alex has to choose between an Apple and Samsung phone. He chooses Apple phone so the cost of Samsung phone is his opportunity cost.
2. Daniel goes to Mc Donald's, there he has a choice between Burger and French fries and he will get a free coke with french fries, he chooses french fries. So the price of burger will be his opportunity cost.
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