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.

postulate of marginal utility

Marginal utility is the additional or extra utility derived from the consumption of one more unit of the given commodity or product.This utility derived from the last unit of a commodity or product purchase.

Example- Travel agencies advertise for certain tour packages with attractive prices and announce a free ticket if there are five tickets booked. Or the first 100 bookings get 10% reduction in the tariff.

MU = Change in Total Utility/ Change in number of units = ∆TU/∆Q

Characteristics of Utility:

The following are the important characteristic features of utility:

1. utility has no ethical or moral significance:

A commodity which satisfies any type of want, whether moral or immoral, socially desirable .

2. Utility is Psychological:

Utility of a commodity depends on a consumer’s mental attitude and assessment regarding its power to satisfy his particular want.

3. Utility diminishes over time:

The shorter the time period,the more quickly marginal utility diminishes.

The concept of Marginal Utility with tasty Paranthas

As we all dool over the tasty paranthas.But do we know that why after eating some,we don't feel like eating more.This is because of marginal utility.
    Marginal utility means when we first consume one parantha,we are much satisfied and happy,then if we consume the second parantha the satisfaction level decreases from the first one. And again if the thjrd parantha will be eaten,then the satisfaction level will be even more less.
               Marginal utility is a very important concept in economics, as it helps in determining how much an item a consumer will buy.