People face trade off's : Examples

People face trade offs says that, if you want to get something you wish , you need to give up something else we want .

For examples.
1) I face trade off whenever I go for shopping, between design of a particular attire and price of that attire. I look at price as well as on design or brand .If I find a good brand with satisfied design , then I would like to give up on price or I would like to give up the brand at the time of shortage of money.
This is when I face trade off between price and design.

2)In every family our parents decide how to spend their family income.They can buy food, clothing or a family vacation or they can spend it for their retirement or college fees of children's college education.When they choose to spend an extra amount on one of these goods , they will be having less amount to spend on some other good.This is where parents face trade offs between their expenditures or on their children.

3)Normally students face trade off between studying for exam or to watch a awaited movie of their favorite hero or heroine.Sometimes they give up exams just because the craze they have towards their favorite hero or heroine as they are desperate to watch movie first day first show, and sometimes they give up watching movies during exams to give importance to their exams.This is when students face trade off between exams and awaited movies.

Why there’s light in the refrigerator but not in freezers?!

While missing my stocked foodpile that I used to have in my refrigerator at home, an interesting thing struck me. Ever wondered why there's light in refrigerators but not in freezers? (some do, but most freezers don't).

One possible explanation is because people open the refrigerator much more than the freezer, thus people benefit more from having a light in the fridge than the freezer. 

However, I read through a few websites, which explain how "Freezers tend to be more densely packed, so a light isn’t going to be helpful" or how "An incandescent light in the freezer will generate too much heat, making the system extremely inefficient."

But these theories didn't seem to be satisfactory explanations to me. So I turned to Economics! And realized, it all comes down to Cost-Benefit Analysis. 

While placing a light in the freezer adds additional costs but will it provide any additional benefits to the consumer considering the fact that he will be opening the fridge relatively more times than the freezer? From the producer point of view, it’s not highly expensive to add a light in the freezer relative to the cost of the whole unit, but it does cost something and as we know, producers want to save every penny in the cost of manufacturing their product. 

Free Cartoon Images 2018

Thus, in nutshell, the benefit of placing a light in the fridge is much more than in the freezer. So, why bother putting a light in the freezer?

Inducement really works!

Meaning:

Incentives are the kind of motivation, which drives us to behave in a certain way, while preferences are your needs, wants and desires.

Types of Incentives:

• ·         Extrinsic incentives: It comes from outside a person. It can be monetory incentives which includes bonuses, income, cash rewards. Or it can be non-monetary such as fame, power or it can be social status.
• ·         Intrinsic Incentives: These types of incentives comes from inside a person. Like getting satisfaction from a work is intrinsic in nature. It is also known as psychologic incentives.

Example:

 Mr. Kishore Biyani’s Future group had a different marketing strategy. Future group provides a privilege card in which a consumer can get benefit if he buys the product from Pantaloons, Big bazaar, Central etc or he takes the service from HP petrol Pumps. A customer gets 1 point for every ₹100 he/she gives for the products or the services he takes from the Future group. In this way they started acquiring customers and added customer lifetime value. From that points a customer can get extra benefits such as availing extra offers and discounts when they buy for the next time.  

Example for an Isoquant Curve

Isoquant Curve

The term Isoquant has two terms, Iso meaning is equal, quant is quantity. Therefore, isoquant represents a constant quantity of output. It is also called as Isoproduct curve. The isoquant curve is a curve which shows all combinations of inputs that have the same level of output. Mainly, the isoquant curve represents a consistent amount of output.

Isoquant and Indifference Curve

Isoquant curve is a contoured line that passes through the same point that which produce same output. While the quantities of inputs two or more are changed. Indifference curve has the maximization of the utility.

Examples of Isoquant Curve

The climatic change with respect to least cost input.

• By moving the production to China, Car manufacturing companies are happy to reduce labor cost, even though the climatic change in China is miserably inadequate.
• The Mini Cooper company is of BMW, which has not to be closed down for one sale of car. The profit curve of isoquant curve flattens at a point of curves of capital curve.

Examples of micro-economics in real life

1.Indian IT industry is successful compared to other countries due to its services offered at low costs- Law of demand
For a decrease in price of services offered by the Indian IT industry, demand for availing their services by customers increases. Hence this accounts for the rapid success of the Indian IT industry compared to other countries.

2. Circus artists/ theatre performers travel to different cities to perform shows- Law of diminishing returns

Watching a particular circus performance or theatre performance decreases the willingness of the customers to watch the same event or show again and again, as explained in law of diminishing returns. Hence, circus artists and theatre performers travel to different cities to perform shows and events.

3. Many multi-star hotels offer unlimited meals to customers- Law of supply
As the cost of making multiple cuisines and dishes increases, multi star hotels increase their supply for sale in the market place.Hence they offer unlimited buffet meals compared to other normal restaurants.

4. Increased skilled labour and technology results in higher production outputs. - Production Function
Skilled labour and technology are both determininants or inputs that determine the output or production of any Industry or organization. better or higher the inputs , better will be the outputs of production.

5. We see more and more domestic tourists or people visiting beaches rather than religious places- law of diminishing marginal utilities.
People tend to lose their willingness or interest in visiting religious places in the long run and prefer to visit beaches that can be visited occasionally or on holidays. Hence they visit beaches more than religious places as seen earlier.

Micro economics concepts

Diminishing marginal utility-
Example:- Ajay everyday goes to grocery store to have maggie, everyday having maggie will lead to decrease in level of satisfaction which Ajay gets and at one point it will diminish as in it will be ove

Rational people think at margin-
Example:- Vijay goes to buy a brand new television in a showroom, so he will look at all the features and the technology used. He will look at benefits he will derive from buying the television.

Law of Demand-
Example:- usually college students go to grocery shop to Harsha, suppose the price of one maggie is rs.10, if Harsha decides to raise the price to rs.12 then the amount of units sold will decrease which means demand is decreased and when price is decreased to rs.8 then the demand will increase.

Elasticity- The proportionate responsiveness of a second variable to an initial proportionate change in the first variable
Example:- when the price of sugar increases the demand for tea decreases because customers usually buy both sugar and tea together and as the price for sugar increases, demand decreases which also affects the demand for tea.

Trade off-
Example:- Daniel goes to a shop to buy one kg of rice, he usually visits that shop and he always buys a chocolate which is his favourite, but now he has to buy rice so he sacrifices chocolate as rice is his necessity.

ECONOMICS CONCEPTS

1. LAW OF DIMINISHING MARGINAL UTILITY:
                                     This law is based on one of the characteristics of the wants i.e., a particular want can be satiable. This law explains relationship between quantity of a commodity and its utility.
                                     According to Prof. Marshall , " the additional benefit which a person derives from a given increase in the stock of a thing diminishes with every increase in the stock that he already has".

 TABULAR REPRESENTATION:

UNITS OF COMMODITY          MARGINAL  UTILITY
                                                                                                                                                                                           1                                                  50
                       2                                                  40
                       3                                                  30
                       4                                                  20
                       5                                                  10
MARGINAL UTILITY:
                                  The additional utility obtained by consuming the additional unit is known as marginal utility.

2. LAW OF DEMAND:
                                    The law of demand is given by Prof. Marshall. According to Prof. Marshall while other things being equal, " If the price increases, demand decreases, if the price falls demand increases".

TABULAR REPRESENTATION:

PRICE                   QUANTITY DEMAND

    1                                    100
    2                                     80
    3                                     60
    4                                     40
    5                                     20

3. LAW OF SUPPLY:
                                 The law of supply states that other things being equal ," The supply of a commodity extends with a rise in price and contrasts with a fall in price."
                                 The law of supply simply explains the relationship between changes in price and changes in quantity supply. Moreover, it also shows a positive relationship between changes in price and changes in quantity supply.

4. EQUI - MARGINAL PRINCIPLE:
                                To maximize utility, consumers allocate their incomes among goods so as to equate the marginal utilities per rupee of the expenditure on the last unit of each good purchased. This is also referred to as the consumer equilibrium.
  MU OF GAS / PRICE OF GAS = MU OF MOVIE / PRICE OF MOVIE = - - - - -MU OF X / P OF    X

5. CONSUMER SURPLUS AND PRODUCER SURPLUS:
                                Consumer plus means difference between the price that consumer is willing to pay and consumer actually pays.
                                Producer surplus means difference between the price that producer is willing to sell and the price actually sold.

A LOOK INTO ECONOMY

OFFERING UNLIMITED MEALS HAS BECOME A MAJOR SELLING FOR MANY ANDHRA RESTAURANTS-

Unlimited meals have captivated people of Andhra Pradesh as it fulfils the maximum satisfaction as per the requirement of people. As we are aware of the different levels of satisfaction on indifference curve. People often tend to go for maximum output minimising the cost.

Take for instance, a similar case which I encountered in Calcutta at Barbeque nation. For 750/- you can have unlimited kababs, grills and main course along with desert. Profitable for those who have a good hunger and appetite.

THREE PERSPECTIVE LOCATIONS FOR A MALL-

LOCATION ‘’A” OFFERS 1000 NET BENEFIT UNITS,

LOCATION ‘’B” OFFERS 800 NET BENEFIT UNITS &

LOCATION ‘’C” OFFERS 850 NET BENEFIT UNITS-

Among the three options, location A, as the people trade of is more as the opportunity cost of acquiring A is 200/- compromising B, similarly opportunity cost for C is 150/-.

For instance, when I looked for MBA colleges, I selected IBA giving up on BIMS, Pune which is my opportunity cost for IBA.

LOTS OF UNSEASONAL PRICE FLUCTUATIONS HAPPEN IN VEGETABLES-

The unseasonal fluctuation in prices is due to the seasons and availability of substitute.

For instance, whenever there is a rise in prices of the vegetables, I go for alternative or substitute vegetable as per the seasons. 

TO MANY, INDIAN IT INDUSTRY SUCCESS S ON ACCOUNT OF THEIR ABILITY TO OFFER PRODUCTS AT LOW PRICES-

This basically explains the competition between Indian IT products and MNC or international IT products. Here we can understand the concept of Cross price elasticity of demand.

For instance, if we have the high computer prices, the prices of the software goes down similar to the Indian  IT product example taken above,

INCREASING NUMBER OF TOURISTS ARE VISITING HILL STATIONS AS OPPOSED TO CONVENTIONAL REGIONAL PLACES-

The above statement describes the concept of marginal rate of substitution. It is the phenomenon where X units of product is taken to replace Y units of products to enhance satisfaction or utility.

For instance whenever there is a rise in price of peanut butter I go for normal Butter. In this case we use the concept of substitution. Whenever there is a rise in price we tend to go for the substitute of that product with another same kind of product.

five term of economic

• law of diminishing return

• law o f supply 

• equi marginal principle 

elasiticity
 An elasticity is a measure of the sensitivity of one variable to another%  change that will occur in one variable in respond at % change in another variable .
example :-if the price of kit kat doubles, the quantity demanded for kit kat  will fall when consumers switch to less-expensive cadbury

law of diminishing return said  that  when certain input is increase with those input which is all ready fixed .

a point where then the  reached at some mean point then its output is decrease.

example:-  when the price of orange is increase  and it is increase at fixed price

then after some time if price remain high and cost of price of orange is constant  only then after

some time the price of orange is fall down.

The law of supply states that more of a good will be provided the higher its price; less will be provided the lower its price, ceteris paribus. There is a direct relationship between price and quantity supplied.

example :-  when the price of nagpur orange is increase then  the supply also became increased

the price of good and service is increase then the supply factor are remain constant.

equi marginal principle  state when consumer allocate  their all income among goods so  as to equate  the marginal utilities per rupees of  the expenditure on the last unit of each good purchased  this will also refer to as the consumer equilibrium  .

In the real world, a consumer may purchase more then one commodity. Let us assume that a consumer purchases two goods X and Y. How does a consumer spend his fixed money income in purchasing two goods so as to maximize his total utility? The law of equi­-marginal utility tells us the way how a consumer maximizes his total utility.

example  :- Suppose a man purchases two goods soap and dish wash whose prices are Psoap and Pdish wash respectively. As he purchases more of X, his MUsoap declines while MUdish wash rises. Only at the margin the last unit of money spent on soap has the same utility as the last unit of money spent on dish wash and the person thereby maximizes his satisfaction.

the production possibility  curve 

the production possibility curve is a hypothetical represention  of the amount of  two different good
that can be  obtained by shifting resource from the production of one to the production of the other the curve is used  to describe a society choice .
example imagine that you are hungry and decide to prepare maggi at home  and you know how to prepare a maggi and what  and how much  ingredient   should put in  maggi then you like the sour  taste of maggi then at thw when you putting a more amount of ketchup in it but you like the taste more so you put acces sos then result the maggi became more sour and last you can,t it .

So what is a production possibilities curve? Well, in basic terms, it is a curve on a graph that shows what possibilities an economy has where production is concerned. More specifically, it looks at different combinations of two goods that an economy can produce using certain resources and technology during a specific time frame.

if the price of kit kat is high then people will prefer the cadbury which is less expensive than kit kat  because both are giving same flavour so people do subsitutation .

BASIC BUT IMPORTANT TOPICS OF ECO WITH SIMPLE REAL LIFE EXAMPLES

1. law of demand
law of demand says that price and demand of goods and services are inversely to each other .If  price will increase than demand will decrease .
Eg:- Off Season things like clothes , fruits etc , price increases and demand decreases .

2.law of diminishing marginal utility 
This law says that other all things will remains same  when extra additional input is consumed , than in result marginal utility will decline .
Eg:-imagine there is a girls who want to buy extra pair of tops and instead of having enough she want more . she will use that less therefore because of more tops her satisfaction level decreases .

3.Inelastic demand
This is one of the case where the demand does not effect or can say does not increase or decrease with respect to increase or decrease in price .
Eg:-increase in price of rice , wheat and pulses is in inelastic demand as increase in price also make in change because of little less demand create not more change in overall change .

4.Supply curve 
supply curve is the graphical representation of two factors one is price and other is supply of goods and services . both are proportional to each other .
Eg:-supply of maggie increases as more the people like the product more the supply will be there , as a result price of maggie will also increase .

5.Consumer behavior
This is the study of individual , group and organisation where customer deals with the price , usage and disposal of goods and services .
Eg:-purchasing of goods from market and satisfied with its price and consumes it fully with full satisfaction is one of the example od consumer behavior .

Some basic concepts of economics

1. Law of diminishing marginal utility

The more of a good that one takes during certain time then marginal utility obtained will be decreasing.

Example:

• Many star hotels routinely offer unlimited buffet meals

The reason why they offer and economics behind this is law of diminishing marginal utility. In the beginning customer has more hunger so more utility then afterwards the utility starts decreasing then after some time there will be a stage where marginal utility will be negative i.e., the customer stops eating.

2. Opportunity Cost

It is the cost of something which you give up to get something

Example:

Two locations for a large retail outlet-location A offers 750 NBU and location B offers 900 NBU

 From the two locations offered we prefer location B which has more NBU and opportunity cost is cost of location A which we gave up

3.Law of demand

This law tells that the relationship between price of a good and the quantity of goods purchased is inverse in nature.

Example:

Indian industry will be able to take advantage through offering products at low prices.

When the price of good is low then demand for the goods increases this is due to law of demand.

4.The production function 

Maximum output Q that a firm can produce for every combination of inputs is called production function.

            Q=F(K,L,TIME,TECHNOLOGY,etc.)

Example:

Increased usage of combination of skilled labour and technology is believed to result in increased output

From above function it is clear that when there is increase in usage of labour and technology then there is increase in output.

5.People face trade-off

We have to make some type of compromise to get one thing against other thing.We solve this using cost benefit analysis.

Example:

We see more and more domestic tourists visiting beaches rather than religious places as seen earlier.

From the two options the people have they choose to go to beaches because the benefits they are getting are more than they are going to religious places.

  

Live the economics through our daily lives.

Circus artists/performers performing in multiple cities/events

Have you experienced/seen the circus/performers performing in your area or locality?

Have you seen the same circus is organised in another city or locality?

These are the questions come in our mind?

Do you know why?

As per economics prospective, we see that utility plays a vital role here.

This is because of due to Law of diminishing marginal utility.

When we consume same goods and services again and again then the utility we are getting will decrease. Similarly, the utility or satisfaction level of audience of the circus will decrease by watching the same circus/performers again and again. So that the circus artists/performers performing in multiple cities.

Lot of unseasonal price fluctuations happen in vegetables.

We all have experienced that the prices of vegetables fluctuate?

Do you think why?

What is the economic concept here?

As we go to the market we bargain for the vegetables price every day, either it is seasonal or unseasonal vegetables. We have seen the fluctuation/variation in the prices of vegetables.

This is because of elasticity of demand.

%change in demand with respect to %change in price. If there is some change in price of the vegetables, then there will some change in demand also.so the fluctuation arises in the price.

Some hotels offer diverse menu both depth and breadth whereas many others offer very few items on their menu

Here we see the paradox of choices,ae we also go to the mall we have seen the various products on a particular segment just like oil,if you go to buy hair oil or soap you see the paradox of choices.

so as per economics people face trade offs.

when we go to the hotels they also provide us their particular segments on their recepies and we face trade offs.

young men and women fancy themselves to participate in beauty contests

young people fancy themselves to look good this is the idea came in our mind but when we look as per economics prospective here factor of demand will play a vital role.

they look good to get the demand factor for themselves.

supply curves for live musical performances

supply curves for live musical performances are constant because their time is schduled ,if the program has to live for 9am to 5pm.supply of the musical performances are always constant.

concepts related to the situations happens in real life

Circus artists or performers performing in multiple cities or events

This is the situation which is related to law of demand because the artist are performing in different cities as the demand is increasing for their performances. As the the law of demand states that, keeping other factors constant, as the price of a good increases, quantity demanded decreases, conversely, as the price of a good decreases, quantity demanded increases.

Success of an IT industry is based on how low the price of the product they offer

The opportunity cost which is also known as alternative cost, the value of the choice in terms of the best alternative while making a decision. The choice is made between several mutually exclusive alternatives.

Increasing number of tourists are visiting hill stations as opposed to conventional religious places.

This concept is related to marginal utility, as we know utility is the satisfaction derived by consuming a product, thus the marginal utility is a good or service in the change of utility from an increase in the consumption of a good and service.

Offering unlimited meals has become a major selling for many Andhra restaurants etc

This concept is related to people face tradeoffs, to get something you have to give up something else you want. Societies face a tradeoff between consumer goods and more public goods, there is a tradeoff between consumption for current and future generations.

Lots of unseasonal price fluctuations happen in vegetables

This concept is related to law of supply as we know, law of supply is a principle of economic theory which explains that as keeping other factors constant, an increase in price results to the increase in quantity supplied. Similarly decrease in price relates to the decrease in the quantity supplied. Price is directly proportional to supply.

5 CONCEPTS OF ECONOMICS

1. LAW OF DIMINISHING MARGINAL UTILITY:

The more of a good that one obtains in a specified period of time, the less the additional utility derived from an additional unit of the good. The utility diminishes overtime.i.e, The shorter the time period, the more quickly marginal utility diminishes and vice versa.

Example: Many star hotels routinely offer unlimited buffet meals.

2. PEOPLE FACE TRADE-OFFS:

It is the first principle of economics. We have to give up something to get something we want.People face trade-off between more consumer goods and more public goods.

Example: Some retail outlets offer diverse assortment of brands both depth and breadth whereas many other carry few products in their assortment.

3.OPPORTUNITY COSTS:

It is an another term for Alternative costs.When one alternative is chosen,the loss of other alternatives can be called as opportunity cost. It represents the benefit of an individual or a businesses misses out when choosing one alternative over the other.

Example: Three prospective locations for a large retail outlet- location A offers 750 net benefit units, location B offers 900 net benefit units and location C offers 850 net benefet units.

4.SUPPLY CURVE:

The willingness or the ability of the producer to offer the goods in the market for the sale at various prices is called as supply. As the prices increases, firms supply more. so the slope of a supply curve is an upward slope. Its worth incurring the extra unit costs, they switch from less profitable goods and in the long run, new firms enter the market.

Example: Supply curve for live sports events.

5.TASTE AND PREFERENCES:

They are the determinants of demand and consumption.They refer to the satisfaction you get on the consumption of a bundle of goods.As said, demand of a commodity depends upon the taste and preferences of that commodity. A change in it effects the level of demand for various goods.

Example: We often see keen interest among young men and women to participate in fashion shows.

Absolute Advantage, Opportunity Cost, Diminishing marginal utility

-         Absolute Advantage

Absolute Advantage refers to that producer who has a capability of producing higher quantity of a good or service than competitors, using fewer inputs than another producer.

                              Absolute advantage When comparing the productivity of one-person, firm, or nation to that of another.

                                 The producer that requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good.

For Example –

There are two farmers in my village they both have equal acres of land for agriculture. In summer season they produce wheat, between them one farmer uses lesser inputs to produce wheat as compare to other and get same advantage. First farmer has absolute advantage of producing wheat.

-         Opportunity Cost

The cost of loss other alternatives when one alternative is chosen.

Opportunity cost is what a person sacrifices when they chose one option over another.

(Opportunity Cost Formula = return of most lucrative option not chosen - return of chosen option)

For example –

My friend was working in a company and he was getting 200000/- per annul, but he thinks he can do better, after few years he left the job and started his own business. Till 4^th years he earned 100000/- each years.

Formula of Opportunity cost = 200000 – 100000 = 100000 is opportunity cost that my friend is losing.

Diminishing marginal utility –

The utility of first unit of consumption of a good or service produce more utility than the second good and subsequently using of extra units, it’s reduces the amount of utility.

For Example: -

Consuming of one sweet first time will give great test and good feeling as compare to second time and subsequently consuming of the sweets will reduce amount of utility.

ECONOMICS BEHIND THE EXAMPLES

EXAMPLE : 9
       
    CONCEPT : MARGINAL RATE OF SUBSTITUTION
 
    JUSTIFICATION :  Here our IT industry providing services at very lower cost when we compare with other countries, So the consumers are finding the same utility at lower price so they are substituting others with this services.

EXAMPLE : 6

    CONCEPT : LAW OF DEMAND

    JUSTIFICATION : Due to demand there is a change in price if the price decreases demand increases, So here decreases in prices increases the price.

EXAMPLE : 5

    CONCEPT : TASTES AND PREFERENCES

    JUSTIFICATION : We always want new things and we feel bored with the daily things, We seeing these religious places daily so hill places will give a new feeling to the tourists.

EXAMPLE : 4

    CONCEPT : MARGINAL RATE OF TECHNICAL SUBSTITUTION 

     JUSTIFICATION : Here by introducing one machine (computer) the speed and efficiency will increases so it will results in higher output
 ex: If you do accounts in tally by posting journal entries, the software will calculate the complete adjustments and directly give the final results which saves the time.

EXAMPLE : 3

    CONCEPT : SUPPLY OF DEMAND 

    JUSTIFICATION : In starting they kept prices low because the demand was low then these prices will attract people, after they increases the prices due to increase in demand. So these curves were directly proportional to each other.

Economics concepts

Opportunity cost :-

Example :  One day it so happened,I was feeling very bored during my summer holidays,so I decided to go Shimla with my friends, but at the same time  my family also planned to visit Jammu & Kashmir.Then I got confused as I am very imotionally attached to my parents,I opted to go to ‘J & K’ with them . So, here Shimla trip is an opportunity cost.

Law of Diminishing marginal utility :-

Example :  When  I visited the Art of Living for the very first time, I felt very happy to see the peace in the environment .After 2 days I again went there with my friends,I felt happy but not so much which I felt first time and after that my happiness started to decrease every time I visited the place. This happened because of the Law of Diminishing Utility.

Law of Demand :-

Example :  Few years back I wanted to purchase one flat in royal place in Mumbai  but it’s price was so high that I could not afford it. As time went by, other  flats also started coming up in that locality and gradually the prices went down , this led me to purchase the flat I wanted to.

People response to incentives  :-

Example : As I am a very big shopaholic one day,I went to Shopper stop to shop some new trendy cloths but I was willing to spend only Rs.2000,but when I reached there I saw that there was an offer stating that "If you buy 2 T-shirts you will get one T-shirt free at Rs. 2500". As shopper stop gave me an incentive I increase my budget to Rs. 2500 and bought those T-shirts.

Law of Supply :-

Example :  Last year  during summer season I wanted to buy One AC  due to the hot temperature, as I went to the shop I saw that the quantity of Mitshubishi branded air conditioners were more in quantity as compared to the others.On inspecting about it i got to know that the prices of Mitshubishi branded ac’s were more than other brands and that is why the shopkeeper kept its quantity more in number. This happens because of the “law of Supply”.

CONCEPTS OF ECONOMICS

1. LAW OF MARGINAL UTILITY: Consumption increases the marginal utility derived from each additional unit declines. 

Example:  Last year I went for guitar classes. On the first class I derived 100 units of utility and on the second it went to 80 units and so on its got decreases.

2. LAW OF DEMAND: “conditional on all else being equal” As the price of goods increases the demand of goods decrease and vice versa.

Example: on 5^th September 2016, when JIO launched the price was very cheap. Due to which the users of JIO increases and the demand of other tele-company decreases.

3. OPPORTUNITY COST:

Example: Last year me and my family were planning to go for a vacation to Manali but suddenly my dates came due to which we have to cancel the plan. So here the opportunity cost was my vacation and the second best alternative was my exam.

4. RATIONAL BEHAVIOUR: Refers to the decision making process that is bases on making choice that result in the optimal level of benefit or utility of an individual.

Example: Lets take an example of junk foods and Fruits. As if we get an choice in between these two so obviously we’ll choose fruits because they are very healthy and its our level of benefit.

5. ISO-QUANT CURVE: Same quantity of output is produced , while changing the quantities of two or more units.

Example: Incentives can be the examples of the iso-quant curve as when we purchase the new laptop we get an antivirus fee so that antivirus can be consider as the incentives.

CONCEPTS OF ECONOMICS

We usually see that restaurants like barbeque nation, they provide unlimited food for fixed amount of price. Because of the word unlimited, people get attracted to that. Hence this concept is referred to PEOPLE RESPOND TO INCENTIVES.  Incentive is something that which induces a person to act.

Now a days people we see tourists are more interested in visiting beaches when compared to religious places as their destination spot. This concept is referred to principle of DIMINISHING MARGINAL UTILITY, if they visit the religious place, their additional utility derived from that is less. Because of this marginal utility gets diminishes as per the people who wish to visit beaches.

As per the law of demand if price of a good decreases, its demand increase. if price gets reduced more customers will come to buy that good, therefore the demand increases.

When I go big bazar I see that there is one plus one offer, I buy that good because I am getting two goods for same price. As the price decreases, the demand for that product increases.

If you participate in a fashion show, suppose you won. you get lots of fame and you become a celebrity in a short period of time. Apart from winning awards you get extra benefits. This concept is referred to PEOPLE RESPOND TO INCENTIVES.

You see price fluctuations in case of fruits, this is because SUPPLY and DEMAND of fruits. Suppose in a festival season, fruits prices get increased because of demand. And also in the case like natural effects, heavy rains, supply of fruits is less so demand is high.

FINDING ECONOMICS IN DIFFERENT SITUATIONS

Situation 1: -

To many, Indian it industry success is on account of their ability to offer products at low prices

underlying economic concept that we can find here is:

Law of demand: when price increases the quantity demand purchased decreases vice versa

Demand: ability of the consumer to buy

price	demand
100	1
80	2
60	4
40	6
20	8
10	10

 Assumptions:

         •    Habits, tastes remain constant

         •    Value of money & income of people will remain constant

         •    Price of substitutes will remain constant

exceptions:

·         Giffen goods (cheap goods) ex: vegetables , petrol  etc.,

·         prestigious goods (costly goods) ex: I phone, branded cars etc.,

Justification for the above situation:

In this case as it industry success because they offering the product at low price so people are showing more interest to buy their products

Situation 2: -

Three prospective locations for mall

Location A offers 1000 net benefits units, location B offers 800 net benefits units & location C offers 850 net benefits units

Choosing the right location and determining of cost:

As if the above locations, location A has more net benefits compare to rest of the locations so I suggest location A we can select it my cost benefit analysis  

Justified answer:

The cost of something is what a you give up to get it, sacrifice what we made is cost (opportunity cost) cost of next best alternative

Here location B, C are the opportunity cost or they next best alternative

Situation 3: -

Offering unlimited meals has become a major selling for any Andhra restaurants etc.,

Identifying the relevant concept:

Law of diminishing marginal utility:

The satisfaction we get after consumption of additional unit in less time will decrease at a point it is called law of diminishing marginal utility

Units of consumption	Marginal utility	Total utility
1	40	40
2	30	70
3	20	90
4	10	100
5	0	100
6	-10	90
7	-20	70

 Total utility:

 total amount of utility that you derived from consuming total number of units.

 Assumptions:

1.It is assumed that utility can be measurable

2.We should consume the units continuously

3.Quality and quantity of the commodity is same

4.Consumer tastes should me remain same

Justification for above situation:

If it come to unlimited food we cannot the unlimited we feel that we are full at a point where as you can see the unit 5, even after that if we try to eat we will feel bad of eating it, so they will charge for unlimited but we eat only limited

Situation 4: -

As the usage of skilled labour combined with technology is increased, the effect is expected to be higher output in service industries

Identifying the underlying economics behind this:

Law of increases in returns to scale:

With a less number of increases in input we get more number of output it is called as increases in return to scale

Change in output> change in input

The appropriate justification:

Here service industries increased both the skilled labour with technology, and the effect they expected is higher output as if stated in the above law

Situation 5: -

Increasing number of tourists are visiting hills stations as opposed to conventional religious places

As an economist best explains this phenomenon:

If income increases people will stop hitting religious places, income is the determinant of demand if income increases demand of luxurious goods will increase (car, hitting restaurants, hitting parks, movies, etc.,) but the demand of inferior goods will decrease (bread, wheat, god, etc.,)

Justify reason:

as per the above rule income of the consumer increases he will increases the expenditure spending in more costly in the above case, tourists stopped hitting temples they are enjoying life by visiting hills stations because of increases in income

Ohh Yeah!! Exams are Finally Completed With These Solutions..

Situation 1:
    To analysts, Indian industry will be able to take advantage through offering products at low prices.
Concept:LAW OF DEMAND
                     It states that quantity purchased varies inversely with price or we can even say that when the price of goods increases then the demand for that good decreases.
Justification:
         We can observe that when the price of some product decreases people start purchasing that product and because of this the demand for that product increases for that time the situation comes under law of demand.

Situation 2:
     Many star hotels routinely offer unlimited buffet meals.
Concept:LAW OF DIMINISHING
                  MARGINAL UTILITY
                        It state that the two more of goods that one obtain in a specific period of time,the less the additional utility derived from an additional unit of good.
Justification:
        When the consumer start eating meals at starting he/she is getting good satisfaction for certain time but later the satisfaction level decrease because diminishing happens in consumption.

Situation 3:
         Often, unseasonal price fluctuations are observed in case of fruits.
Concept:PRICE MECHANISM
                       It is a manner in which the price of goods and services affect the supply and demand of goods and services in various situations.
Justification:
       During festivals lessons the demand for the fruits increases and because of that price also increases for that demands but after the festival the demand decreases as well as the price here we can observe the fluctuation of price.

Situation 4:
     Theater artistes/performers performing in multiple cities/events.
Concept:MOBILITY OF INPUTS
                         Transferring of goods and services and it will be available at low cost without any scare when compared.
Justification:
         We can observe that there will be change in place and get benefited with more money when there is transfer for artists, that means here the mobility is present for theatre artists.

Situation 5:
       Three prospective location for a large retail outlet- Location 'A' offers 750 net benefit units, location 'B' offers 900 units and location 'C' offers  850 net units.
Concept: OPPORTUNITY COST
                       It is also known as alternative cost, it is the value of the choice in terms of best alternative while making a decision.
Justification:
         The retailer would select location 'B' because the outlet produced by 900 units which is actually because of the demand from the consumer which is very high.