FINDING ECONOMICS IN DIFFERENT SITUATIONS

Situation 1: -

To many, Indian it industry success is on account of their ability to offer products at low prices

underlying economic concept that we can find here is:

Law of demand: when price increases the quantity demand purchased decreases vice versa

Demand: ability of the consumer to buy

price	demand
100	1
80	2
60	4
40	6
20	8
10	10

 Assumptions:

         •    Habits, tastes remain constant

         •    Value of money & income of people will remain constant

         •    Price of substitutes will remain constant

exceptions:

·         Giffen goods (cheap goods) ex: vegetables , petrol  etc.,

·         prestigious goods (costly goods) ex: I phone, branded cars etc.,

Justification for the above situation:

In this case as it industry success because they offering the product at low price so people are showing more interest to buy their products

Situation 2: -

Three prospective locations for mall

Location A offers 1000 net benefits units, location B offers 800 net benefits units & location C offers 850 net benefits units

Choosing the right location and determining of cost:

As if the above locations, location A has more net benefits compare to rest of the locations so I suggest location A we can select it my cost benefit analysis  

Justified answer:

The cost of something is what a you give up to get it, sacrifice what we made is cost (opportunity cost) cost of next best alternative

Here location B, C are the opportunity cost or they next best alternative

Situation 3: -

Offering unlimited meals has become a major selling for any Andhra restaurants etc.,

Identifying the relevant concept:

Law of diminishing marginal utility:

The satisfaction we get after consumption of additional unit in less time will decrease at a point it is called law of diminishing marginal utility

Units of consumption	Marginal utility	Total utility
1	40	40
2	30	70
3	20	90
4	10	100
5	0	100
6	-10	90
7	-20	70

 Total utility:

 total amount of utility that you derived from consuming total number of units.

 Assumptions:

1.It is assumed that utility can be measurable

2.We should consume the units continuously

3.Quality and quantity of the commodity is same

4.Consumer tastes should me remain same

Justification for above situation:

If it come to unlimited food we cannot the unlimited we feel that we are full at a point where as you can see the unit 5, even after that if we try to eat we will feel bad of eating it, so they will charge for unlimited but we eat only limited

Situation 4: -

As the usage of skilled labour combined with technology is increased, the effect is expected to be higher output in service industries

Identifying the underlying economics behind this:

Law of increases in returns to scale:

With a less number of increases in input we get more number of output it is called as increases in return to scale

Change in output> change in input

The appropriate justification:

Here service industries increased both the skilled labour with technology, and the effect they expected is higher output as if stated in the above law

Situation 5: -

Increasing number of tourists are visiting hills stations as opposed to conventional religious places

As an economist best explains this phenomenon:

If income increases people will stop hitting religious places, income is the determinant of demand if income increases demand of luxurious goods will increase (car, hitting restaurants, hitting parks, movies, etc.,) but the demand of inferior goods will decrease (bread, wheat, god, etc.,)

Justify reason:

as per the above rule income of the consumer increases he will increases the expenditure spending in more costly in the above case, tourists stopped hitting temples they are enjoying life by visiting hills stations because of increases in income