Qn: Many star hotel routinely offers
unlimited buffet meals.
Concept: PEOPLE RESPONSIVE TOWARDS INCENTIVE
We know people are responsive
towards incentive. when people get some incentive they at least once think of
buying or trying that service or product. They try to compare with the similar
range of products and services. So to get the attention of the buyer's sellers
try to give more discount, coupon code and many more incentive so that people
will spend more.
These things are good from the economic
factor because consumer spending is an important economic factor because it
usually coincides with the overall consumer confidence in a national economy.
Consumer spending makes up roughly 70% of our country's economic activity.
Ex- Once I had gone to a mall. I was thinking of taking a shirt from Killer
brand but when I went there I saw Allen Solly was giving 20% flat discount on
every product so I went there and took two shirts instead of one.
Qn: Some retail outlets offer a diverse
assortment of brands in both depth and breadth whereas many others carry few
products in their assortments.
Concepts: INCOME EFFECT
People spend their income on buying food, clothes and many things that
they need but what happen when there is a change in income, how it affects the
People's behavior, how they make changes in their buying behavior.
To measure the changes in people's consuming behavior we use parameter
call income effect, it is defined as the change in the demand of goods and
services with respect to the change in income of the people.
There are Three Types of income effect
-Positive income effect:
When people income increases the demand for normal goods also increases
and this is called the positive income effect.
-zero income effect:
The zero income effect is in the case of neutral goods where consumer
quantity demanded is fixed.like a drug, we buy it irrespective of our income.
- negative income effect:
When there is an increase in the
people's income, the demand for cheaper things decreases and they shift to the
costlier things and it is called negative income effect and that type of good
is called inferior good.
Ex- Before I was using local company
jeans (low cost ) when my pocket money was low but now I am using branded jeans
because of the increase in my pocket money.
Qn: We see more and more domestic
tourist visiting beaches rather than religious places as seen earlier.
Concept: LAWS OF DIMINISHING MARGINAL UTILITY
We the people spend our money on our needs, satisfaction, and comfort.
Also sometimes we take an extra unit of that needs if our satisfaction is not
fulfilled. We never hesitate to pay extra money if our satisfaction exceeding
our budget but when the budget exceeds the satisfaction level of extra-unit
consumption, we think whether to go for it or not. Basically, if we tell the
marginal utility goes on diminishing. The Law Of Diminishing Marginal Utility states that all else equal as consumption increases the marginal utility derived from each additional unit declines
Ex- I am a food lover. Once I had gone
to a hotel and I was very eager to eat Rasmalai and I order one. I felt very
satisfied when I took it then I ordered one more and enjoyed but little less
than the first one after that also I ordered another one but now in the half of
the Rasmalai I felt I can’t eat it anymore but just because of I paid for it I
ate the whole.
Qn: To analysts, Indian industry will be
able to take advantages through offering products at a low price
Concepts: LAWS OF DEMAND
The laws of demand is the relation
between the price and the quantity demand of the product. When there is an
increase in the price of the product the quantity demand of the product
decreases and vice versa, this is called as laws of demand.
(
http://www.lidderdale.com/econ/104/gifs/Fig3-1.gif )
Ex-
Our family used to have 10 kg of Mung Dal in a month when it was 50
Rs/Kg but when the price gradually rises to 80 rs/kg, we used to have it 7 kg
in a month. This is how quantity demand affected when there is a rise in the
price of that product.
Qn: Three prospective locations for a
large retail outlet location ‘A’ offers 750 net benefit units, location ‘B’
offers 900 net benefit units & location ‘C’ offers 850 net benefit units
Concepts: OPPORTUNITY COST
Opportunity cost is defined as the benefit of some product that we miss
out when choosing another product.
Ex: Once I had gone to a shop for a blue
shirt and while choosing I got another shirt which not in blue color but I
liked it very much. I was willing to buy both the shirt but at that time I had
not enough money to buy those 2 shirts. Then I choosed that blue one because at
that moment that was giving me more benefit. So the opportunity cost for the
blue shirt is that another shirt that I couldn’t bring.
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