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.