People Face Trade-offs
To get one
thing we like, we have to give up another thing we like. Making decisions
requires to trade-off another, in other words to select one among them we have
to trade off another.
Example:
People buying
MI phones instead of Samsung phone, although they like samsung but they trade off Samsung phones with MI
phones because of the extra features that Mi phones are giving.
Law Of Demad
Law of
demand states that, keeping other things constant if the price of the commodity decreases
the quantity demanded increases and if the price of the commodity increases the
quantity demanded decreases.
There is a
inverse relationship between price of the commodity and quantity demanded.
Example
Few days ago
when the price of maggi decreased from Rs 12 to Rs 11 the quantity demanded for
maggi increased.
Production Function
Production
functions shows the maximum amount of output which can be obtained from a given
amount of input.
Q=K+L
Q is the quantity
of output
K is the
capital input
L is the
labour input
In short run
only labour inputs can be changed.
In long run
both capital and labour inputs can be changed.
Law Of Supply
Law of
supply states that ,keeping other things
constant if the price of the commodity increases the quantity supplied
increases and if the price of the commodity decreases the quantity supplied
decreases.
There is a
direct relationship between price and quantity supplied.
Example:
The demand
for royal enfield bikes is increasing which leads to increase in the price of bikes
and made producers to supply more of royal enfield bikes.
Diminishing Marginal Utility
It states that with the consumption of one extra unit of product the utility derived from the product goes down.
credits: www.google.co.in
Assumptions
·
It
should be applied on a same consumer at the same time
·
The
product size, shape should be same
Example:
I ordered parathas
when I started eating, the amount of utility derived from first paratha is 10
units , second paratha is 8 units, and third paratha is 6 units. The utility goes
on decreasing with the consumption.
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