Concepts of Economics happens in our daily life

1)law of demand

The demand of commodity falls as its price rises. If all other factors remain unchanged, then as the price of commodity increases, its demand decreases, and as the price of the commodity decreases its demand increases. This is the general behavior we observe in the market. This gives us the law of demand.

Example-1 As the price of the petrol increases the demand for the petrol decreases and people starts preferring public transport and as the price of the petrol decreases the demand increases and people start using their personal vehicles.

Example-2 As the price of the potato in the market increases the quantity demand decrease.

2)law of diminishing marginal utility

The additional benefit which a person derives from a given increase of his/her good of a thing, diminishes with every increase in the good that he/she already has. It is based on the common consumer behavior that as more and more units of commodity provided to him/her, the utility of additional units goes on decreasing successively. This is due to the reason that the moment a person begins consumption of a commodity to satisfy his/her want, its intensity starts diminishing and the commodity that is consumed becomes less and less useful.

Example-1 When you consume a bottle of Coca-Cola, after your first bottle, you'll be less inclined to take another bottle and after the second you're far less inclined to take the third bottle and it goes on like that until you reach a saturation point, from that point your utility begins to decline and continues to decline just like that.

Example-2 When you have that first bite of chocolate cake, it seems like you just can't get enough of it! However, as you eat your second and third piece, you may start to realize you have had enough cake. For each additional unit of a good, (in this case for each additional piece of cake) the added satisfaction you receive from consuming the good decreases. This is known as diminishing marginal utility.

3) producer surplus

The difference between the amount that a producer receives from the sale of a good and the lowest amount that producer is willing to accept for that good.

Example-1 Suppose I am a shopkeeper and the actual price of a TV is RS20000 and when I sell it for RS25000 the extra amount of RS5000 which I got will be the producer surplus.    

Example-2 Suppose I am a factory owner and I want to sell frooti and the cost of production of the frooti is RS8 and I am selling in the market for RS15 and the extra amount of RS7 will be the producer surplus.

4) Law of supply

The supply of commodity increase as its price rises. If all other factors remain unchanged. This is the general behavior we observe in the market. This gives us the law of supply.

Example 1: As the Price of the A.C in the summer increases, the supply of A.C tends to increase and the manufactures supply more and more A.C in the market to earn profit.

Example 2: Lets take an example of fruit vendor. He will try to make available more fruits for sale when the price of fruits are more an vice versa. In this case the as the price of the fruits rises , the quantity supply of the fruits also tends to increase.

5)consumer surplus

It is based on the operation of diminishing marginal utility which states that the marginal utility for a person from a commodity shows a tendency to fall as he/she increases its consumption, therefore the consumer will be willing to pay a higher price for initial units but a lesser price for successive units. The excess of the price which a person willing to pay rather than go out without the thing, over that which he/she actually does pay, is the economic measure of this surplus satisfaction. It may be called as consumer surplus.  

Example-1 Suppose I am going to purchase a bike which costs RS 1lakh, but my budget is RS95000 and if I get the bike which I was willing to buy for RS 95000 the amount of RS 5000 will be the consumer surplus.

Example-2 Suppose I am going to buy 10kgs of mangoes, where the price is RS500 for 10kgs   but I was willing to pay RS400 and if I get 10kgs of mangoes for RS400 the amount of RS100 will be the consumer surplus.