Let's discuss some concepts of Economics, with some real life examples to know how Companies uses economics to conduct their business activities.
Concept 1: Law Of Demand
Higher price of good then lesser is the Quantity demanded and vice versa,in a defined time period.
Example :
1.UBER
when demand for their rides increases the supply of the cars then there is a price hike. And when there are too many drivers and not enough riders then there price comes down.
2. PIZZA HUT
Large number of orders are observed in Pizza hut on Wednesday. As they offer 50% off on Wednesday thus Demand increases on Wednesday.
Example :
1.UBER
when demand for their rides increases the supply of the cars then there is a price hike. And when there are too many drivers and not enough riders then there price comes down.
2. PIZZA HUT
Large number of orders are observed in Pizza hut on Wednesday. As they offer 50% off on Wednesday thus Demand increases on Wednesday.
Concept 2: Price elasticity of Demand
Rate of change in Quantity demanded due to rate of change in its price.
Example:
1. PepsiCo
Substitute is there, Coca-Cola, so consumer will shift i.e. large decrease in quantity demanded if price increases.
2. Apple products
Apple is a well known brand. So even if they increase price of their new product, the consumer will still buy it due to their loyalty as a customer or company's brand image which we call as perfectly inelastic demand.
Rate of change in Quantity demanded due to rate of change in its price.
Example:
1. PepsiCo
Substitute is there, Coca-Cola, so consumer will shift i.e. large decrease in quantity demanded if price increases.
2. Apple products
Apple is a well known brand. So even if they increase price of their new product, the consumer will still buy it due to their loyalty as a customer or company's brand image which we call as perfectly inelastic demand.
Concept 3: Law of Supply
Higher price of good results in higher quantity supplied.
Example :
1. DMART
They offer products of different companies under their umbrella where they keep the price of commodities lesser than what company offer, it results in increased number of quantity supplied.
2.NIKE
The Quantity of nike shoes supplied is high even though it has increased price because there is a increase in numbers of shoe producers and nike has more efficient technology to deliver good quality product.
Concept 4: Consumer Surplus
Value of good minus price paid for the good.
Example :
1. INDIGO AIRLINES
In Indigo airlines food service they offer Paperboat Alphonso Aam Ras ₹100 while the market price of paper boat juices is ₹28. The extra amount paid by consumer while purchasing i.e.72 Rs. Is consumer surplus.
2 OLA CABS
In case of heavy rain and bad weather there is a price surge in ola cabs. It normally amounts to Rs.60(approx) for 4-5km. And in case of rain the rate goes above Rs.100 and people book cabs at that rate too. This makes the consumer in surplus situation.
Value of good minus price paid for the good.
Example :
1. INDIGO AIRLINES
In Indigo airlines food service they offer Paperboat Alphonso Aam Ras ₹100 while the market price of paper boat juices is ₹28. The extra amount paid by consumer while purchasing i.e.72 Rs. Is consumer surplus.
2 OLA CABS
In case of heavy rain and bad weather there is a price surge in ola cabs. It normally amounts to Rs.60(approx) for 4-5km. And in case of rain the rate goes above Rs.100 and people book cabs at that rate too. This makes the consumer in surplus situation.
Concept 5 : Law of Diminishing marginal utility
As consumption increases the marginal utility derived from every additional unit keeps on declining.
Example :
1.PIZZA WORLD, Jaipur
Pizza world offers unlimited pizza @500 for two people. Here they attract customer by providing pizza at nominal rate but uses law of diminishing marginal utility i.e. Consumers gets less utility after every additional pizza they eat.
2.TAJ HOTELS
When we book a room for a day for two, the hotel provides breakfast in a buffet system to you. One can have all that they want free of cost, here they use law of diminishing marginal utility as a consumer cannot eat the whole even when they provide a large quantity.
As consumption increases the marginal utility derived from every additional unit keeps on declining.
Example :
1.PIZZA WORLD, Jaipur
Pizza world offers unlimited pizza @500 for two people. Here they attract customer by providing pizza at nominal rate but uses law of diminishing marginal utility i.e. Consumers gets less utility after every additional pizza they eat.
2.TAJ HOTELS
When we book a room for a day for two, the hotel provides breakfast in a buffet system to you. One can have all that they want free of cost, here they use law of diminishing marginal utility as a consumer cannot eat the whole even when they provide a large quantity.
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