1.PRODUCTION
In
economics, production involve the creation goods and services by using
resources. It is a process to change the raw material into finished goods. It
is nothing but creation of utility.EXAMPLES:LABOR: Lab our is essential. Products don’t
create themselves, I need people to provide service and people to manage
business activities. I can basically think of labor as exertion of any type of
human effort in producing something as providing a service some labor is
relatively unskilled, such as digging ditches while other labor requires a
high degree of education and skills
CAPITAL: My father’s plant uses several different type
of capital. He has forklifts to move products around the warehouse, and has
machinery that assembles the part. His office uses desk, phones and computer to
keep track of everything.
2.Consumer’s surplus :- A consumer is
generally willing to pay more for a given quantity of a good then what he
actually pays at the price prevailing in the market .
EXAMPLES :-1. I
go to the market for the purchase of pen. I am mentally prepared to pay RS 25
for the pen which the seller has shown to me . He offers the pen for RS 10 only
. I imminently purchase the pen . I were willing to pay RS 25 for the pen but I
am delighted to get it for RS 10 only. Consumer’s surplus is the difference
between the maximum amount a consumer is willing to pay for the good . In my
example the consumer’s surplus is ( RS 25 – RS 10 )
2.I
purchase matchbox I am willing to pay the amount much higher then there market
value , I would be willing to pay RS 10 for a match box rather than go without
it but actually pay RS one only on the purchase of a match box. Consumer’s
surplus on the purchase of match box thus is RS 9.0
3.PRODUCER SURPLUS : Producer surplus is a measure of
producer welfare. It is measured of producer welfare. It is measured as the
difference between what producers are willing and able to supply a good for and
the price they actually receive.
EXAMPLES:1. Coffee : coffee is a good example of a product that is essentially the same across all producers but , depending on where it is sold, the price of a cup of coffee can vary widely . Starbucks can change more than MC Donald's for a cup of coffee because coffee drinkers have strong preference regarding where we buy our coffee drinks and what they buy believe is a reasonable price for a cup of coffee and the highest price for a cup of coffee and highest price is the producer surplus.
2.Athletic shoes : Nike shoes are available in store ranging from high- end spatting goods stores and department stores to discount stores the producer surplus is the difference between the lowest price available and the highest price paid across the economy for Nike stores.
4.Inelastic Demand : Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price.EXAMPLES 1: PETROL : Petrol has few alternatives because people with a car need to buy petrol for for many driving is a necessity. There are weak substitutes,such as train,walking and the bus but generally , if the price of petrol goes up demand proves very inelastic.
2. SALT ; If the price of salt increase , demand would largely be unchanged . It is only a small percent of income and people tend to buy infrequently . It is good with no real substitute at all.
5. Marginal Utility :- is the extra benefit or value we get by consuming one more additional unite of that goods and services
Example :-
<1> In my family there are 5 members . I purchases 5 tickets to an amusement park , and is told there is a buy 5 get the 6th one free sale . How ever there is no additional happiness from that 6th ticket because i only need 5 tickets. If however I had a friend or relative i wanted to take with them, the 6th ticket has the marginal utility .
<2> One day I won 2 airline tickets but if i do not have some one to travel with to that particular destination on those particular dates , there is no additional satisfaction to having that 2nd ticket.x
x
2.Consumer’s surplus :- A consumer is generally willing to pay more for a given quantity of a good then what he actually pays at the price prevailing in the market .
EXAMPLES :-1. I go to the market for the purchase of pen. I am mentally prepared to pay RS 25 for the pen which the seller has shown to me . He offers the pen for RS 10 only . I imminently purchase the pen . I were willing to pay RS 25 for the pen but I am delighted to get it for RS 10 only. Consumer’s surplus is the difference between the maximum amount a consumer is willing to pay for the good . In my example the consumer’s surplus is ( RS 25 – RS 10 )
2.I purchase matchbox I am willing to pay the amount much higher then there market value , I would be willing to pay RS 10 for a match box rather than go without it but actually pay RS one only on the purchase of a match box. Consumer’s surplus on the purchase of match box thus is RS 9.0
<1> In my family there are 5 members . I purchases 5 tickets to an amusement park , and is told there is a buy 5 get the 6th one free sale . How ever there is no additional happiness from that 6th ticket because i only need 5 tickets. If however I had a friend or relative i wanted to take with them, the 6th ticket has the marginal utility .
<2> One day I won 2 airline tickets but if i do not have some one to travel with to that particular destination on those particular dates , there is no additional satisfaction to having that 2nd ticket.x
x
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