Real Life Example on Law of Demand

Law of Demand:

            Law of Demand states that quality purchased varies inversely with price. In other words, the higher the price, the lower the quantity demanded. The reason for this phenomenon is that consumer’s opportunity cost increases so they must give something else up or switch to the substitute product.

Example:

Few months ago when the price of potato increased. We started to use less amount of potato and purchase less amount and is the most usable item in kitchen but we started to use less amount of potato. The quantity demanded has decreased.

Economic concepts in our lives

Law of Demand

Do you think that If a vegetable vendor sells his items at a cost less than his competitor’s (but still maintains his profit margin), will he be able to take advantage?

The answer is a yes, he will be able to take advantage and sell more than others, we can relate this to the ”Law of Demand”. As the price of the items of the concerned vegetable vendor goes down the demand for his products goes up.

Changing Tastes and Preferences

When I was a kid I loved to watch cartoon, as I grew up my interest shifted from cartoon to friction serials, and gradually when I started having less spar time, my interest moved to movies, and I also found them more convenient.Finally now I watch short skits, short films and s mall stand-up comedy routines as a source of entertainment. These incidents can be related to the concept of ”Changing Tastes and Preferences of Consumers”.

Law of Diminishing Marginal Utility

I did my graduation in Kolkata and one or twice a month, while returning home from college, I used to visit The Victoria Memorial which was on the way. Initially I really liked visiting the place, but as time passed by, the satisfaction I derived from an additional visit went on decreasing. This happened because of “The Law of Diminishing Marginal Utility”.

Opportunity Cost

During one of my aunt’s engagement ceremony ,I and my family had to go to Delhi. We had the option of going by train or by boarding a flight. I really love the feeling of travelling by train, but on that journey we had selected the option of boarding a flight as a lot of time would be saved. This loss of the experience of a train journey in order to spend more time during the engagement by boarding a flight is called as the “Opportunity Cost”,

People respond to incentive

This often happens with me during shopping. Once during such an encounter I was shopping at an outlet looking out for casual t-shirts. The price quoted per t-shirt was Rs.700, but there was another offer stating that if I would buy three t-shirts, the overall discounted price would come down to Rs400 per t-shirt. After looking at the offer I instantly made a decision of purchasing . This change in my decision happened because “People  Respond to Incentives”.

Economics In Daily Life

Law Of Demand: Other things remaining constant, when the price of a commodity increases the demand of that product decreases.

Examples: There is a milk manufacturing companies naming Amul. Suppose customer A consumes a product of Amul. When the price increases, the consumers decreases using it and may transfer to another product.

People Respond To Incentives: It can be in point of the buyers and sellers. In both cases price and quantity is the main thing.

Examples: When I went to D-Mart, for buying biscuits and snacks. I always go for products which offers low price and the quantity is more, i.e my incentive as a buyer.

Utility: When people derive satisfaction when consumption of any product or service.

Examples: When I bought a MI phone, I was satisfied using it and its features overwhelmed me. The satisfaction I derived using the phone is my utility.

Marginal Utility: Marginal utility is the additional satisfaction a consumer gains from consuming one more unit of a good or service.

Examples: I went to a restaurant for having a pizza and after having the first slice the satisfaction I derive is the marginal utility.

Rational People think at a margin:  People want to derive most for the amount they are spending.

Examples: I went to a shop for buying an apple juice, and Tropicana was offering juice and a biscuit of RS.5, and the total price was RS.99 and Real was offering only juice for Rs.99. I bought Tropicana because it was offering something extra than Real, so as it was offering more I bought it.

Know Our life From Economics Point Of View

Law Of Demand :-

It is the inverse relationship between the price of a goods and the quantity .
Example:-

• In flipkart when big billion day come people do more shopping because, we get discount and prices are low.

• If we are going to market and see different type of apple with different rate like 100 rs/kg and 60 rs/kg. A buyer can willing and able to buy 2 kg of first one then customer can buy 4 kg of last one.

Law of Supply:-

 It says that when price goes up quantity goes up and vice-versa.
Example:-

• When any popular celebrity come for concert, price of ticket is high so event team provide more ticket for benefit.

• When price of  onion start decreasing the producer decrease the supply of onion in market.

Elasticity:-

It is a measure of the sensitivity of one variable to another.

Example:-

• When the price of Postpaid service  is increase we are switch to prepaid service.
• D Mart gives us discount that is benifbenef for us so many customers of Big Bazar are move to D Mart

Consumer Surplus:-

 It is the different between the price consumer willing to pay and consumer actually pay.
Example:-

• I want to buy new mobile and my budget is 10000. I search a mobile and I find a mobile of 10000. But I have to pay only 9000 because there was 10% off using SBI Credit card and that 1000 is consumer surplus.

• When we go to the  Reliance mall for buy product a  with certain budget and we see that Reliance giving 50% off in that product and we buy happily. That 50% off is the Consumer Surplus.

Producer Surplus:-

It is the difference between the producer is willing to sell and the price actually sold.
Example:-

• I want to sell my bike at 35 k for buy a new bike. After market research i find that the price of my bike is 40 k and I sold it at 40 k at Olx.com. Here 5000 is producer surplus.

• When we go to the market and ask a shopkeeper price about a shirt they say 1000 though they want sell it at 500 and after bargaining we buy it at 700. Here 200 is producer surplus.

DEMAND AND SUPPLY

DEMAND
Demand refers to the number of goods or services the consumer willing to purchase at any given period of time.

LAW OF DEMAND
The law of demand states the price rises when the quantity demand falls and vice versa other things remaining constant.
Example: Suppose, the price of a potato tends to rise in that case people will buy less quantity of potato. On the other hand, if the price of the potato falls, in this case, people will buy potatoes in bulk so that to avoid buying potatoes in huge amount afterwards.

DEMAND CURVE
The demand curve is the graphical representation of the law of demand. It is drawn with price in the vertical axis and quantity demand on the horizontal. The graph represents the curve as downward sloping from left to right because the price is inversely proportional to quantity demand i.e lower the price higher the quantity demand and vice versa.

                                             

SUPPLY
Supply refers to the willingness of the seller or producer to sell good or services at different prices.

LAW OF SUPPLY
Law of supply states that the increase in the price results in the increase in the quantity supply and vice versa other things remaining constant.

Example: There is a drought and very few strawberries are available. More people want the strawberries than there are berries available. The price of strawberries increases dramatically.

SUPPLY CURVE

The supply curve is a graphical representation of the law of supply. It is drawn with price in the vertical axis and quantity supply in the horizontal axis. The graph represents the curve as upward sloping from left to right because the price is directly proportional to quantity supply i.e higher the price, higher the quantity supply and vice versa other things remaining constant.

           

                           

FACTORS AFFECTING DEMAND OF PRODUCT
1. Price of the commodity
2. Price of Related Goods
3. Income of the Consumer
4. Taste and Preference
5. Future price Expectations

FACTORS AFFECTING SUPPLY OF PRODUCT
1. Price of the given commodity
2. Cost of Production
3. Technology
4. Taxation Policy
5. Factors of Production
6. Objectives of the firm

Cost Benefit Analysis

Concept of Cost Benefit Analysis:

• Cost benefit is a tool which modern financial analysts adopt before undertaking any financial operations or commercial activity.
• The ultimate aim of a business organization is to make profits.
• Therefore, any system in the organization must produce more benefits as compared to its costs for the organization to survive and prosper.

What is Cost Benefit Analysis?

•  A cost benefit analysis is done to determine how well a planned action will turn out.
• The analysis relies on the addition of positive factors and the subtraction of negative ones to determine a net result.
• Cost Benefit Analysis has been established primarily as a tool for use by governments in making their social and economic decisions.
• Cost Benefit Analysis measures costs and benefits to the community of adopting a particular course of action.

COST	BENEFIT
Any negative effect on an organization resulting from the implementation of the project. Examples: Maintenance costs Environment Research and development Labour Costs	A benefit is any positive effect on the organization resulting from the implementation of the project. Examples: Increase in productivity. Reduction in Costs. Saving Time.

The General Steps of Cost Benefit Analysis are:

1.        Specifying the project clearly
2.        Describe quantitatively the inputs and outputs of the program
3.        Estimate the Social cost and benefits of these inputs and outputs of the program
4.        Compare these benefits and costs