Here I am discussing about five important concepts of economics.
1.Consumer surplus
consumer surplus is the difference between the price customer willing to pay and actually pays.
*Example- 1. You use one Lifeboy soap every month and it costs 20 rupees. One day you visit Big Bazaar and see three soaps together price 54 Rupees that means each soap's price is 18 rupees. Here you were willing to pay 20 rupees but you actually pay 18 rupees so consumer surplus is 20 minus 18 is equal to 2 Rupees.
*Example 2- your favourite lipstick costs rupees 168 after freedom sale of Amazon when its actual price is 185, but in nykaa its price is 148. So consumer surplus is (168 - 148) is equal to 20 rupees.
2.Producer surplus
it is the difference between the price producer willing to sell and price actually sold.
*Example1- suppose you have a vegetable shop where bunch of coriander leaves costs 4 rupees per bunch, now a customer bargain with you and takes 3 bunches at rupees 10 which you were willing to sell at 3 rupees per bunch. Here producer surplus is {10-(3*3)}=1.
*Example 2- you have a beauty parlour where gold facial costs 500 rupees but if anyone take a package of facial and some other services the total cost becomes 700 rupees where the gold facial costs 350 rupees. The actual cost of the facial is 250 rupees. Here producer surplus is 350 minus 250 is equal 100 rupees.
3.Utility
The concept of utility says people get satisfied but their consumption activities but there is certain difference between satisfaction and utility but the theory of consumer behaviour believes both are synonymous. To measure utility we tech Cardinal and ordinal measurement.
*Example1- you are a foodie person and you are looking for restaurant at Zomato, where you are carefully noticing their ratings whether it is above 3.5 or not in a five point scale. This is a Cardinal measurement of utility.
Now when you search top 20 restaurants of Bangalore it is the ordinal measurement of utility.
*Example 2- when I was buying Matrix biolage shampoo for the first time I saw its rating at first and then I searched on net whether it is within top 10 Matrix shampoos or not. The first one was Cardinal measurement of utility and second one was ordinal measurement of utility.
4. Elasticity of demand
Elasticity is the measure of responsiveness of quantity demanded or supplied to a change of one of it's determinants.If quantity demanded shows a greater chage with changing price it will be called as elastic but if change is slight then the demand is inelastic.
*Example1- after implementation of GST which is 5% for restaurant( service tax for restaurants was 18% before), foodies have started visiting the restaurant more frequently,here demand is elastic,but it doesn't have much impact on non foodies which denotes inelastic demand.
*Example 2- sudden hike in price of normal rice will not have much effect on consumption of this because it is the necessity for everyday's dal-chawal thing. So, here demand is inelastic. But when price of basmati rice increases people start consuming it in lesser amount. Here demand is elastic.
5. Law of demand
It claims that one other parameters are equal the quantity demanded of a good Falls with the rising price of the good.
*Example 1- my mom is very fond of golden jewellery and she used to visit jewelers at least once in a month before. Since the price of gold/per gram has increased she hasn't visited the shop for more than one year. Here rising price of gold has decreased the demand whether her income is constant.
*Example 2- we used to watch movie at bioscope in our nearest City Centre at least twice in a Month and its cost was 50 rupees per head but since the price has increased 100 rupees per head we watch movie very rarely,in 3-4 months gap almost. Here demand has decreased again with increasing price where my parents income is constant.
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