1. Law of diminishing marginal utility
The more of a good that one takes during certain time then marginal utility obtained will be decreasing.
Example:
- Many star hotels routinely offer unlimited buffet meals
The reason why they offer and economics behind this is law of diminishing marginal utility. In the beginning customer has more hunger so more utility then afterwards the utility starts decreasing then after some time there will be a stage where marginal utility will be negative i.e., the customer stops eating.
2. Opportunity Cost
It is the cost of something which you give up to get something
Example:
Two locations for a large retail outlet-location A offers 750 NBU and location B offers 900 NBU
From the two locations offered we prefer location B which has more NBU and opportunity cost is cost of location A which we gave up
3.Law of demand
This law tells that the relationship between price of a good and the quantity of goods purchased is inverse in nature.
Example:
Indian industry will be able to take advantage through offering products at low prices.
When the price of good is low then demand for the goods increases this is due to law of demand.
4.The production function
Maximum output Q that a firm can produce for every combination of inputs is called production function.
Q=F(K,L,TIME,TECHNOLOGY,etc.)
Example:
Increased usage of combination of skilled labour and technology is believed to result in increased output
From above function it is clear that when there is increase in usage of labour and technology then there is increase in output.
5.People face trade-off
We have to make some type of compromise to get one thing against other thing.We solve this using cost benefit analysis.
Example:
We see more and more domestic tourists visiting beaches rather than religious places as seen earlier.
From the two options the people have they choose to go to beaches because the benefits they are getting are more than they are going to religious places.
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