FEW PRINCIPLES IN ECONOMICS ALONG WITH EXAMPLES

MARGINAL RATE OF SUBSTITUTION (MRS): MRS is nothing but the rate at which the consumer is ready to sacrifice a good for other goods.
For example:
Example1: I went to dmart to buy some monthly groceries and I found paneer and curd, now I'm confused which product to buy and what to give away. So, if I want to increase the quantity of paneer from 1 unit to 2 unit, I have to give away 6 unit of curd, the unit of curd were 12 and 6 . MRS is calculated as =change in quantity∆y/change in quantity∆x
=12-6/2-1
=6/1
=6 unit (Where 'y' is curd and 'x' is paneer).
Example2: In my family everyone has 2 phones , so there are total 6 numbers of phone. So, everyone decided to buy a tablet by giving up 6 phones.
NORMAL AND INFERIOR GOODS: Normal goods are those goods whose demand increases with the rise in income of a customer.
Inferior goods are those goods whose demand decreases with the rise in income of a customer.
For example:
Example 1: I went to an ice-cream parlour and found 2 types of ice-creams a) off branded ice-cream b) branded ice-cream and I usually consume off branded ice-cream. Now suppose my income increases , so it is likely that I will switch from off branded to the branded one . So in this case we may call off branded as the inferior good and branded as normal good.
Example 2: After coming to IBA, I'am having plain oats in my breakfast. But before when I was at my home I use to customise my oats with almonds, protein powder, rasins, cocoa powder, honey etc. So when there was 7an increase in the income, the demand increases.
EQUIMARGINAL PRINCIPLE: This principle states that how a consumer allocates his money income between various goods to obtain maximum satisfaction.
For example:
Example 1: I gave my friend 100 rupees to spend on 3 commodities a) 16 rupees/biscuits b) 12 rupees/chips c) 8 rupees/chocolate . So he has to attain maximum satisfaction by applying this formula- MARGINAL UTILITY (MU) OF BISCUITS/PRICE=MU OF CHIPS/PRICE=6MU OF CHOCOLATE/PRICE. When he eats 1 biscuit he gets 128 unit of utility, from 2 biscuit he gets 96 utility and so on. And the marginal utility from the 1st biscuit he derived is 128/16= 8 . So if he buys 1 biscuit×16=16                    2 biscuit×16=32
2 chips×12= 24                     3 chips× 12= 36
3 chocolate×8= 24               4 chocolate×8=32
Total = 64<100                      Total = 100 so he has                                              attained full satisfaction.

OPPORTUNITY COST: Opportunity cost is the unit given up to attain or choose from the available choice.
For example:
Example 1: I'am spending my time and money for a movie, I cannot spend that time at home cooking and I can't spend the money on something. If my best alternative to seeing movie is cooking, then the opportunity cost of seeing the movie is the money spent plus the pleasure I let go by not cooking.
Example 2: I started to go gym to become physically fit instead of taking vacation during my holidays. The opportunity cost was the vacation.
CONSUMER SURPLUS: Difference between the price consumer is willing to pay and consumer actually pays
For Example:
Example 1: I had a phone which I wanted to sale for 4000 rupees. I found 2 customer Harish and Nehal , Harish was willing to pay 4500 as he is need of an emergency and Nehal was willing to pay 4000. So, Harish's consumer surplus is 500 rupees and Nehal is the marginal buyer who enjoys no consumer surplus in this transaction.
Example 2: I wanted to buy a laptop with hardcore gaming processor and I'm willing to spend 50000 rupees. And after visiting the market I found a laptop for 40000 which meets my criteria, I saved 10000 additional compared to what I was willing to spend. The 10000 is consumer surplus.