Various Concepts of Micro-economics with Real life based examples

   Among various concepts of Micro-economics I am going to discuss only 5 and those are:-

(a)People Face Trade Off

(b)Cost Benefit Analysis

(c)Law of Demand

(d)Law of Diminishing Marginal Utility

(e)Consumer Surplus

                                    People Face Trade off

Trade off means To get something you want, you have to give up somthing else you want. Trade off is all about customer behaviour related to what to buy, what not to buy, what I like about a particular product or what I hate.

For example: (1) On a random day I went to buy a gaming console. I was initially confused between Xbox ane and Ps3, which one to buy. So I told my preferences to salesman what features I want in console and thus with his help I bought Ps3 and sacrificed Xbox ane.

(2) I was given ₹ 35,000 by my father. I wanted to buy a laptop and also a smartphone. But since I had only ₹ 35,000 to purchase either of both, I bought laptop and sacrificed smartphone.

                                     Cost Benefit Analysis

Trade off can be resolved through “Cost Benefit Analysis”. Cost Benefit Analysis is a process by which an individual who is facing Trade off between two commodity can analyse the situation and choose the best commodity available among them to buy. It analyses the cost of both the commodity and the benefits derived from them to help choosing the commodity which is more beneficial.

For example:(1)Yesterday when I was planning to go to D-Mart, I had a confusion which cab service to choose(ola or uber). So to resolve the confusion I did Cost Benefit Analysis on both the cab service related to the price, offer and service that I am getting. Which resulted in choosing Ola service due to high in value related to cost.  

(2)While purchasing my last smartphone I was confused which smartphone to buy. So I went through Cost Benefit Analysis of smartphone related to its features and specifications and thus with the help of Cost Benefit Analysis I ended up buying a new smartphone.

                                        Law of Demand

The law of Demand states that other things remaining constant, the quantity demanded of goods or services increases with the decrease in price and demand of goods or services decreases with increase in price. There is a Inverse relationship between price and quantity demanded.

For Example:(1)The momoseller beside the gate of Indus Business Academy used to sell the momos at a rate of ₹ 50 per plate. But since he increased the price to ₹60 per plate, the demand for his momos decreased a lot. So increase in price decreases demand.

(2) Datawind branded tablets are not famous among people and sales are not good in India. But during Big Billion Day sale on Flipkart, the price of the Datawind tablets were reduced by high amount and suddenly the demand of tablets were increased. So decrease in price increases demand.

                                 Law of Diminishing Marinal Utility

The additional utility derived from the commodity begins to decrease with the addition of every single unit of commodity in a specific period of time, this is refers to as Law of Diminishing Marginal Utility. The shorter the time period, the more quickly marginal utility diminishes.

For example:(1)On first week of march 2018 I went to Nicco park in Kolkata. I was very specific about which rides I have to ride, Rollercoaster was my favourite ride. As soon as I reached there I hoped on rollercoaster. After 2-3 rides the enjoyment derived from it started decreasing, this was because of the law of diminishing marginal utility.

(2)As I am a chicken Lover, when I came to IBA I started eating chickem puff outside atleast 3 pieces a day. But after few days the satisfaction derived from eating chicken puff started decreasing due to Law of diminishing marginal utility.

                                 Consumer Surplus

Consumer surplus is the difference between the price consumer is willing to pay and the consumer actually pay. It is considered as the consumer benefit.

For example:(1)Last Sunday I went to Mobile store to buy a new phone cover for my phone. When I asked the shopkeeper the price of cover he told ₹ 250. After few minutes of bargaining I was able to drag down the price to ₹ 150 and purchased at it. The difference between shopkeeper initial price and my purchasing price (i.e, ₹100) is consumer surplus.

(2)On the month of February I went to buy a footware for myself from local market in Kolkata. Initially he asked me ₹ 900 for the sandal but after few minutes of baraining he sold me sandal at ₹ 350. So the difference amount between ₹900 and ₹ 350 is consumer surplus.