UTILITY
Whenever we purchase something 1st we
look for what the value we will get from it and what would be the satisfaction
level and benefits and that value of the goods is called the utility of the
goods.
Utility can be ordinal utility and
cardinal utility.
Ordinal utility is the utility get by
the consumer which can’t be measured by numerically
Cardinal utility is the utility get by
the consumer which can be measured by numerically (ranking, grading etc.).
MARGINAL UTILITY
Marginal utility is the extra value and
satisfaction we get by consuming more 1 extra unit of that particular goods.
Example:1. when we consume our 1st favourite
food then we want to consume more of that so what is the extra satisfaction we
get from that that is the marginal utility.
Example:2. when we play any good video game 1st time
we wish to play more and we get more satisfaction by playing once again so that
satisfaction is marginal utility.
TOTAL UTILITY
Sum of the utilities derived by a
consumer from various units of goods and services He/she consumes.
Example:1. Suppose I am fond of eating sweets, I like
sweets. I go to the market to have some sweets I ate sweets one by one but not
satisfied much again have one more, Again I am not satisfied much, I am eating
till my satisfaction. At a point I stop eating sweets and that is the point my
satisfaction level has reached its maximum that is my Total utility. Here one
thing should note when total utility is maximum then marginal utility will be
zero.
Example:2. when I am in BPO sector in Lucknow, I used
to work 8 hours. I have some target to fulfil that in 8 hours. Every day I used
to interact with 300 people and I also love to interact but after 300 I cannot
satisfy the people because my level of satisfaction to interact has reached at
maximum point. I used to say to my team leader now I can’t able to interact, I can’t
add one or more person to interaction, means I can’t work, my target has fulfilled
at that point I am totally satisfied that is my total satisfaction.
LAW
OF DEMAND AND LAW OF SUPPLY
Demand for a
particular commodity refers to the commodity which on an individual consumes or
Household is willing to purchase per unit of time at a particular price.
When
supply of a product goes up, the price of a product goes down and demand for
the product can rise because it costs loss.
At
some point, too much of a demand for the product will cause the supply to
diminish. As a result, prices will rise. The product will then become too
expensive, demand will go down at that price and the price will fall.
Supply
and demand should reach an equilibrium. The amount of goods being supplied is
the same as the amount demanded and resources are allocated efficiently.
LAW OF SUPPLY
Example:1. onion crops are very needed for household over the course of
the year and there is more onion than people would buy normally. To get rid of
the excess supply, farmers need to lower the price of Tomato and thus the price
is driven down for everyone.
There
is a drought and very few are available. More people want the tomato than The
price of Tomatoes increases dramatically.
Example:2. A huge number unskilled
workers come to a city and all of the workers are willing to take jobs at lower wages. Because there are more workers than there are available jobs, the excess
supply of workers drives wages downward.
LAW OF DEMAND
Example:1. A popular artist dies and, thus, he
obviously will be producing no more art. Demand for his art increases
substantially as people want to purchase the few pieces that exist.
Example:2. A new restaurant opens up in town
and gets great reviews. There are only 12 tables in the restaurant but everyone
wants to get a reservation. Demand for the reservations goes up.
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