Concepts of economics and their application in real life.

1.ELASTIC DEMAND

Elasticity is a measure of variables sensitivity to a change in other variable. Elastic Demand is when price or other factors have effect on the quantity consumers want to buy.

Example: -

Price of coco cola pet bottle is 15/-. If the price rises to 20/- everyone who used to consume coco cola stops purchasing it and starts buying thumps up which is substitute for coco cola. Change in the price is small but the quantity demanded changes in large quantity.

2.INELASTIC DEMAND

As the price of a good or service increases or decreases, the demand for it will stay the same

Example: -

For example, we can take example of BMW series 5 car which costs about 80 Lakhs. If the price of the car reduces to 78 Lakhs, there will be no change in demand for that car. Even the change in the price is high but it does not effect on the quantity demanded.

3. SUPPLY

Supply is the producer’s willingness and ability to supply a good at different prices, where all other factor held constant.

Example: -

For example, on the occasion of Diwali every sweet shops supply more quantity of sweets than they supply in normal days because they know that the demand for sweets is high on that day. It’s the supplier’s willingness to supply what quantity to the customers.

4.CARDINAL UTILITY

The neo-classical economists, who believe that utility is measurable, and the customer can express his satisfaction in cardinal or quantitative numbers, such as 1,2,3, and so on.

Example: -

For example, some people say that they get 5000 units of utility by purchasing Nissan car and 8000 units of utility by purchasing BMW car.

5.LAW OF DEMAND

Law of demand says that increase in the price of the good results in decrease in the quantity demanded for it and in the same way decrease in the price of the good increases the demand for that good and vice versa. It shows the negative relationship between the price and the quantity demanded for that good.

Example: -

For example, if the price of the onions decrease then people will buy more quantity of onions. In the same way if the price increases, quantity demanded decreases. This is exceptional in the case of Giffen goods.