The Elasticity Of Demand
The elasticity of
demand can be defined as the ratio of percentage change in quantity demand to
the percentage change in price.
For Ex:
1. I went
to restaurant to eat burger thrice a week. Suddenly they increase the price of
the burger, so that now I went once a week to eat a burger.
2. I used
to full filled the fuel tank of car in a week, but suddenly the price of fuel
increase, now I fill half fuel tank of car in a week, due to increase in price.
The Elasticity
Of Supply
The elasticity of
supplied can be defined as the ratio of the percentage change in quantity
supplied to the percentage change in price.
Examples-
1. When
there is a increase in the price of Benetton t-shirts the company promotes to
sell a pack of 3 tshirts with a minimal discount on the total price. The
company does this to promote sales of the goods with respect to the hike in
prices of tshirts. This change in the supply of the tshirts with respect to
change in price is an example of price elasticity of supply.
Consumer Surplus
The consumer surplus is the different between the price
consumer is willing to pay and the actually price pay by the consumer
For Ex:
1. I
gone to buy a shirt, the actual cost of the suit is Rs 1200 but I was willing
to pay only Rs 700 after negotiating, I ends up by paying Rs 850. The difference
between the price that I was willing to pay and ends up paying is called as
Consumer Surplus.
2. I
gone to buy a mobile phone, the actual cost of the mobile is rs10000, but I am
willing to pay only rs 8000 after negotiating, I ends up by paying rs 8500. The
rs 500 is consumer surplus.
Producer Surplus
The
producer surplus can be defined as the difference between the price the
producer is willing to sell the goods and the actual price he ends up selling.
For
Ex:
1. In
my shop I want to sale a electric tube of Rs 150, but a customer came to me and
ask for 8 electric tubes, I sold 8 electric tubes by Rs 1360. The prices of
tubes Rs 1200. The different of sell price and actually is Rs 160 , this rs 160
is knowns producer surplus
2. I
renowned a new car. After 2 year, I want to change a car, but I don’t have
enough money to purchase a new car. I decide to sale my car, a customer came to
me to purchase my car, he willing to pay rs 2 lakhs of the car. Latter another
person come to me, he willing to pay rs 2.5 lakhs, so that I sold my car to
him. The increase in rs 50000 is a producer surplus .
Law Of Diminishing Marginal Utility
The law of diminishing marginal utility states that as
the quantity consumed of a commodity increases per unit of time, the utility
derived by the consumer from the successive units goes on decreasing provided
the consumption of all other goods remains constants.
For Ex:
1. First time I gone to wonder land park with
my family, I enjoyed a lot there. Second time, I went there with my friends I
had little less fun. Third time I went with my cousin, that I enjoyed but not
that much when I went there for first time. Now you can see the graph of the
enjoyment is decreasing in every visit. This diminishing is known as law of
diminishing of margin utility
2. I gone to watch a movie with my friends in
pvr, first time I watched movie in a interested way and I enjoyed a lot. After
2 weeks I again watched that on my mobile phone, that time I enjoyed little
less. After three month, I watched that movie on television, that time I feel
little bored. This diminishing of interest in movie is knows as law of diminishing
of margin utility
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