APPLIED ECONOMICS CONCEPTS

UTILITY

Amount of satisfaction a customer gets from consuming a particular good or service.

Example 1:-  The amount of satisfaction we will get from buying a umbrella in monsoon / summer season will be much higher if we buy the same umbrella in winter season.

Example 2:- Amount of satisfaction we will get from drinking a bottle of cold drink on a hot humid day will be much higher if we drink the same cold drink on a cold breezing day.

DIMINISHING MARGINAL UTILITY

Consumption of a same good or service repeatedly will slowly reduce the utility that the customer would get from the first consumption of the product.

Example 1:-  This concept is highly used in restaurant business where they provide unlimited buffet system. The consumer tends to lose the satisfaction while eating and hence benefiting the business.

Example 2:- Rain for a prolonged period lose the amount of satisfaction it will get on the first time.

EQUI MARGINAL UTILITY

The behaviour of customer to allocate their incomes among various goods and services to obtain maximum utility.

Example 1:- While buying laptop the budget remain constant we tend to choose between better ram, graphics card, processor etc to obtain maximum utility.

Example 2:- While selecting college of the amount you can spend remain constant we tend to choose between where the college is, faculties, Infrastructure etc.

SUBSTITUTE GOODS

Increase in price of a particular good will lead to increase in demand of another good.

Example 1:- Increase in price of coca cola will lead to increase in demand for Pepsi.

Example 2:- Increase in price of a particular college will lead to increase in demand of another rival college. (Assuming the standard of the college remain equal to each other)

ELASTICITY OF SUPPLY

Change in quantity of supplies from the producer to the change in the price of the product

Example 1:- During the festive season price of clothes increases as a result supply of clothes also increases.

Example 2:- During summer season price of woolen clothes decreases as a result supply also decreases.