EXAMPLES AND CONCEPTS RELATED TO SOME IMPORTANT TERMS OF ECONOMICS

   1.  DEMAND

vOne day my brother was thinking to buy a smartphone with latest features, he had the desire to buy a phone, he had enough ability to pay for that but he was not willing to buy that phone so we can’t say that it is demand.

    Demand is “when consumer has a desire, ability, and               will to purchase goods at various price in a

particular period of time.”

With the absence of any of above mention points,         there will be no demand.

vFew months ago my mother was thinking to buy a latest trend saree. She had enough money to buy the saree, and she was willing to buy that saree. So, these three points (desire, thinking, and willing) describes my mother’s demand for saree. 

2. UTILITY

One day my friend was very hungry, he went to a shop

and ask for fruit and he was ready to pay rs.500 for fruits. So, we can say that he derives utility from that fruit.

  So, we can say that “when consumers satisfaction derives from their consumption activities is known as utility.”

There some terms related to utility:

·      Total utility

·      Marginal Utility

There are some examples related to it:

My friend who was very hungry he bought apples.

Suppose, an apple possess 10 utils (reference of measure). However, under this condition the Utility obtained from the first apple will be higher say 12 utils.

He consumed next apple and he would not get the same level of satisfaction suppose he got 3 utils from second apple this extra unit of utility is nothing but Marginal Utility. The utility of each successive apple will go on decreasing and when he develop such an aversion for apple he may vomit on further consumption, in such cases utility may even Negative.

Quantity	Total utility	Marginal utility
1	12	12
2	15	3
3	20	5
4	20	0
5	19	-3
6	17	-2

3.Production possibility Curve

·      A factory near my home produces Bags and Shoes Name leather factory .It makes combination of production, for example, if factory produce highest amount of shoes like 5000 pairs then there will no production of bags. If its deceases its production of shoes by some amount like 800, then it will produce 1000 bags and if they decreases shoes to 3700, bags will 1500 and so on.

From the above example it representation of the “amount of two different goods that can obtained by shifting resources from the production of one, to the other this is called production possibility curve.

Production of shoes	Production of bags
5000	0
4200	1000
3700	1500
3000	2000
2200	2800
1500	3200
0	4000

shoes 

                             Bags

·      Same we can take example of Cadbury when the festive seasons like rakshabandhan, diwali comes, it started increasing production of celebrations and decreases the the production of normal pack chocolates in comparison to normal time production.

4.BUDGET SET

·      One day I had rs.5000 and I wanted to buy dresses and shoes and price per dress was approx. 1000 and shoes 500.

So, possibility of combination are as follows:

Dress	Shoes	Spending on dress	Spending on shoes	Total
0	10	0	5000	5000
1	8	1000	4000	5000
2	6	2000	3000	5000
3	4	3000	2000	5000
4	2	4000	1000	5000
5	0	5000	0	5000

   dress      

                 

              shoes

so, from the above example we can say that all combinations of goods that’s lie on or inside the budget line is called budget set .

  

5.Consumer surplus

·      When Jio came in market before that we were paying more amount for our phone expenses like high telephone bills , high data packs etc and we were use to of that but when jio came the expenses reduces like we were willing to pay minimum of rs.1000 for three months but jio came with the offer of rs.500 for three months.

Here rs.500 is consumer surplus.

“the difference between the price consumer is willing to pay and consumer actually pays is known as consumer surplus.”