Law of Diminishing Marginal Utility:
Rama loves to eat corn. So,he gets 7 corns. As he eats the first corn,he thinks that this is the most delicious corn he ever had. When he eats the second and third corn he was also satisfied, even though as much as not the first corn. By the sixth corn Ram felt so full. After that when was trying to eat the seventh corn, he could not take it anymore. The more Ram consumed the corn,the less benefit /satisfied he was.
Say another example like Two friends Sita and Gita had a bet of eating higher number of pastries. Sita having the sweet tooth thought that she would definately win thus challenge. But after consuming the 3rd pastry she started hating the pastries, her excitement level was down.She wasn't enjoying anymore.
Inelastic Demand :
We all consume milk everyday for a healthy lifestyle. Milk is also known as complete food.So no matter whatever the price is we buy it because that is our basic need.
Like that only,we need soaps everyday for bathing,washing clothes,dishes,etc. So,no matter whatever the price is we are bound to buy it.
Elastic Demand :
We use tomatoes in daily cooking. But as soon as we get to know that there is a rise in price of tomatoes we stop consuming tomatoes.
Similarly, when there is rise in price of the cars,then there is a fall in demand of it.
Substitute Goods:
When there is a rise in price of sugar,then people start looking for its alternative.Jaggery is the substitute/ alternative of sugar.
Also take the example of tea and coffee ,when there is arise in price of tea people drinking tea tend to shift towards coffee and tge vice versa.
This is how a substitute goods become substitute when price rises.
Luxury Goods:
When people start purchasing a good when its price is high.
Like people purchase ray ban sunglasses which is costlier in price. And in case of cosmetics, people prefer lakme,maybelline instead of local brands. Because such goods are status goods.
No comments:
Post a Comment