Study on flexibility and satisfaction levels

 1)  ELASTICITY OF DEMAND:-

    If there is a change in price of a good the demand for the good also changes. Elasticity of demand shows us to how much extent the change has occurred in demand curve.

Elasticity of demand are of three types:-

1. Price Elasticity
2. Income elasticity
3. Cross elasticity

1) PRICE ELASTICITY:- Responsiveness of change in quantity of good because of change in price of the good is called price elasticity.

EXAMPLE 1:-

 Let us take an example of what happened recently to me in order to understand the price elasticity. when I went to purchase clothes in Reliance last week the prices are cheaper compared to before because of flat sale so i bought extra 3 pairs of clothes because of less price. Here there is a change in price so the quantity of goods also increased.

EXAMPLE 2:- I went to buy 2 pairs of sandals due to high price i bought only one. Here change in price resulted in decrease in the quantity of good.

2) INCOME ELASTICITY:- Change in quantity of good because of change in price of the good is called price elasticity. 

EXAMPLE1:- When my income is 40000 per month I will buy 2 pairs of clothes for one month. If it is increased to 50000 I will buy 3 pairs. Here the income is increasing my demand for the quantity of good is also increasing.

Example 2:- Due to change in income instead of buying 10000 worth watch I will buy 15000 watch.

3) CROSS ELASTICITY:-   Change in quantity demanded of one good due to change in price of other good is cross elasticity. 

Example1:-  The price of the yipee noodles is less as the yipee company is offering discount instead of purchasing maggie as there is no offer on maggie i bought yipee. 

EXAMPLE2:- Due to price increase of coco cola I prefer thumbs up. It is a substitute for coco cola 

4) CONSUMER BEHAVIOR:- Fundamental issue in micro economics is consumer behavior. on the below three concepts consumer decides what goods and services to buy.

           * Consumer prefernces

           * Budget constraints

           * Consumer choices

EXAMPLE 1:- when I want to shop clothes I always prefer to go for a mall. My first preference will be going to shop and buying it directly rather than online shopping.

EXAMPLE 2:- Budget constraint also plays a major role in buying a good. I prefer to go to those stores where my budget will match. And also to the stores who provides more discounts.

5) LAW OF DIMINISHING MARGINAL UTILITY:- Additional satisfaction derived after consuming additional unit of commodity is called as marginal utility. If the additional units increases the marginal utility decreases. The more the additional units, the less the satisfaction level.

EXAMPLE 1:- I am fond of ice creams when I consume ice cream from my favourite ice cream store my satisfaction will be higher. If i take 2nd  ice cream my satisfaction level will be less compared to 1st ice cream. If I go with one more I may not be able to eat and my satisfaction level goes completely down.

EXAMPLE 2:- When I watch my favourite hero movie. I will be much satisfied If I watch it second time also I can be more satisfied. I can be satisfied until I watch it for 4 to 5 times. After that if I watch i feel bore my satisfaction level goes down.