1.People face trade-offs:
A trade-off involves a sacrifice that must be made to get a certain product or experience.when we sacrifice one thing to obtain another, that's called a trade off.A trade off can be defined as to choose one option in between two, the option which we choose in favour of another and the opportunity cost is what is sacrificed in order to get something.
Example: 1. In my Mat exam I scored 84 percentile ,so I received lots of calls from b Schools for the course of PGDM but I choose two colleges of Bangalore IBA and Christ University both colleges are good and it creates confusion in my mind what to choose? I choose IBA because the tuition fees of 2 years for the course of PGDM in IBA is 7 lakhs and tution fees of Christ University is 10 lakhs. So I choose IBA instead of Christ University , my opportunity cost is rupees 3 lakhs of Christ University.
2.when I was in class 12 I have been selected as a cricket captain of my school team.On 4th April 2014 our team was going for Varanasi (UP) for inter school cricket championship but unfortunately on that day I have my exam of NDA so I choose to appear for the NDA examination instead of going for cricket championship , so my opportunity cost is interschool cricket championship and the reward which is a cricket trophy and the feeling of pride, Happiness for the school and for our team.
2.law of demand: law of demand states that there is an inverse relationship between the price and the quantity demanded. When the price increases the demand for the commodity decreases and when the price decreases the demand for the commodity increases, other things remains constant or unchanged.
Examples: 1. In my Home town Bareilly (UP) there was a sale on each Thursday of a week , people become very excited for that sake because on that day there was 40 percent off on every pair of shoes, jeans and shitrs in comparison of another week days. So on that day a large number of customers visits in that market to purchased these goods, because less price increases the customers.
2. If the price of chicken increases from rupees 180 to rupees 250 , the quantity demanded for the consumption of Chicken among the people goes down or decreases.
3.Diminishing Marginal utility: when the Consumer Consume a particular type of goods more numberof times in a specific period of time and as the consumption of the goods increases there is less utility which is derived from an additional unit of the good consumed by a consumer.The rate of utility diminishes over the shorter time period more quickly marginal utility diminishes .The rate at which marginal utility diminishes depends on individual tastes, preferences, choices and beliefs.
Example:1. A student consume 4 cakes as he consume first piece of cake the extra utility or satisfaction which he derived is more in comparison of other three pieces of cakes which he derived later, as he consumed more pieces of cakes the marginal utility diminishes.
2.When a student joins a swimming classes for learning swimming the extra utility or satisfaction which he derived from the first day of joining was more in comparison of another days of a month, as the days are passing the utility also decreases or diminishes .
4. Consumer Surplus: The consumer Surplus can be defined as the difference between the price Consumer is willing to pay and the price which consumer actually pays.
Example: 1.when I went for mall to purchased mobile for rupees 25000 but the salesperson offers me the same phone at rupees 22000 as a discount of festival offer , so rupees 3000 was a surplus for me as a consumer.
2. When I went for purchasing chocolates from the market which cost rupees 500 but as I visits the shop the salesperson offers me the same packet of chocolates at rupees 450 because of Diwali offer ,so rupees 50 is a consumer Surplus for me.
5.Producer Surplus: A producer surplus can be defined as the difference between the price producer is willing to sell and the price actually sold by him.
Examples: 1. My grand farther had a gun which is made in England (1945) model which he purchased at rupees 500 at that time but he maintains his gun properly and during the year of 2013 he sold his gun at rupees 15000 , so he received 14500 as a producer surrplus amount.
2.I have a phone which I purchased at rupees 5000 and I used it for 2 years one of my friend was in a need of phone because his phone was lost and he had same phone with same colour which I had so he requested me to sell the phone which I had I sell him at rupees 5500 because he needs it urgently , so as a producer I earns rupees 500 as a producer surplus.
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