Few Concepts of Economics with examples

LAW OF DEMAND

The Law of demand states that price and quantity demanded of a product are inversely related,

i.e., When the price decreases demand increases and when price increases demand decreases, (other factor remains constant).and vise versa 

Example:

Momo shop in front of IBA college gate used to sell momo at Rs40 for 1 plate as the demand increased he increased the price as Rs60 per plate.

PEOPLE RESPONED TO INCENTIVES

Incentive is something that that induces a person to act. People responds to incentives because they get benefited more from it.

Example:

While purchasing products from DI MART when we find more offers in some products then we tends purchase more products.

 

OPPORTUNITY COST 

Opportunity cost is the highest valued alternative forgone whenever a choice is made.

Example:

Before joining new college for PGDM course I compared between IBA and IFIM college. After getting all reviews from other sites and students I choose IBA instead of IFIM. So I choose IBA over IFIM. Therefore IFIM is my opportunity cost.

UTILITY

Utility is the level of satisfaction that we get after consumption of goods and services.

Example:

After consuming biriyani from a good restaurant the level of satisfaction that we get after consuming biriyani is the utility.

DIMINISHING MARGINAL UTILITY

Diminishing marginal utility states that the more of a product or services a consumer consumes the marginal utility will fall gradually.

Example:

We love to eat ice cream. Last day I ate a scoop ice cream it was tasty and derives a great utility but after eating the second and the third scoop of ice cream the tastes falls and the marginal utility falls rapidly.