CONCEPTS OF ECONOMICS

PEOPLE FACE TRADE OFF

This is the first principle of economics; to get one thing we have to give up other thing.

                                                                   Or

Trade-off is a situation in order to get one quality, we have to lose other quality.

Example 1

 I faced trade off in situations like shopping, in restaurants and watching movies. When I choose to spend extra money on clothing and spend less on other two things.

Example 2

I went to a birthday party night before the exam, thus left with less time to study.

THE COST OF SOMETHING IS WHAT YOU GIVE UP TO GET IT

Decision making requires comparing the costs of the two goods and its benefits.

Opportunity cost is what you give up to get it.

Example 1

Last week I went to a restaurant, the cost of biryani and as well as fried rice is same. I decided to buy biryani. Here the opportunity cost be the enjoyment of having the delicious biryani.

Example 2

I had faced with a choice to study or to watch a new released movie. I knew the right choice is to study but I choose to watch movie that resulted with a low mark in ssc.

INCENTIVES

is something that encourages a person to act in positive or negative way.

                                                               Or

Incentive is a reward that induces people to act towards it.

Example 1

One day I went to a shopping mall to buy clothes. I saw that in a particular brand there was one plus one offer for the same cost. Because of that incentives, like extra one I purchased that.

Example 2

When I was working in a company, I had a dead line that if I complete the particular work in limited days like 15 days, I get 10000 as incentives. Because of that incentives I worked hard to get it.

CONSUMER SURPLUS

It is the difference between the price that consumer is willing to pay and he actually pays.

Example 1

In summer season, I went to market to buy mangoes which were in a big basket of about 50 in numbers. Price was 1000 rs and I thought to pay only 800 rs, as the bargaining process starts price lowered to 600 rs for that basket. I actually paid only 600 rs. I got 200 rs as consumer surplus.

Example 2

It was a festival season, looking to buy clothes. I saw a shirt that costs 1500 rs in shop, the same shirt that costs only 1000 rupees  in online store. Here I got 500 rupees as consumer surplus.

LAW OF DEMAND

The quantity bought of a good or service is a function of price while all other things are constant.

When the price of a product increases people buys less, so demand decreases. They will buy more when the price of that product falls. Demand and price have inverse relationship.

Example 1

Many times I faced this situation, in weekend and festival season the cost of ticket of bus is high because of demand from people. When it comes to week days the cost is low because of low demand.

Example 2

I went to market to buy chicken; I saw there was less number of people because there was high price. Demand is less due to high price.so I bought the less quantity of chicken in order to cut the price.