Various types of production function.

The production function:-

                             In ordinary sense production means creation of utility.But in ECONOMICS production means transformation of input into output.we can also say maximum output (Q) that a firm can produce for every specified combinations of inputs.

          i.e          Q=f (K,L),     Where , Q = Output

                                                            f = Function

                                                            K=Capital

                                                            L =Labour

Types of production function:-

                                              The short run refers to a period of time in which one or more factors of production cannot be changed factors of production.Short run functions are mainly two types one is Fixed factor and another is variable factor.Factors that can't be varied over this period are called fixed period.building,machinery are the fixed factor and labour and raw material are the variable factor. Long runs refers to the period wherein all inputs are available. Long run and short run depends on the structure of industry.

                                             

                                 source:-(www.google.co.in/search?q=types+of+production+function)

Units for "Measure of Pleasure" from goods & services

Total Utility: It is total amount of satisfaction that a consumer derives from all the units of commodities or service.
Marginal Utility: It is the utility derived by the consumer from consuming the additional units i.e., more than one unit of a commodity.

Example: Let us assume the following data is a measure of satisfaction (in terms of utils) derived from mobile usage from 1 to 7 hours continuously. Then the Total utility & marginal utility are as follows.

 







Then following depicts the above data in the form of curves, where X-axis represents no. of hours of mobile usage & Y-axis represents the utils from consumption.

 







The above data represents the relationship between total quantity(hours) consumed or used, total utility & marginal utility.
observations:

1. when marginal utility is zero, total utility will be maximum.
2. when marginal utility falls, total utility increase at diminishing rate.
3. when marginal utility is negative, total utility decreases.

Marginal utility

UTILITY:-
It means the satisfaction of consumer wants.
example:-
if you buying a titan watch, how much do you satisfied by buying the titan watch.

DIMINISHING OF MARGINAL UTILITY

It means the good which we obtain in utility is less the product which is compared in consumer utility The goods which obtains specific period of time,the decrease additional utility is from the unit of the good.
example:-
If consumer wants to see movie for first time and gets satisfaction after watching second time he decrease his satisfaction which is derived for the first time. 

SUPPLY PENDULUM

SHIFT IN THE SUPPLY CURVE 

Supply pendulum means shift of the supply curve. The market supply curve holds other things constant, When one factor changes the supply curve shift. In other words shift of supply means the supply curve moves rightward or leftward depending on the change in the cost of production and other related factors.

FOR EXAMPLE suppose the price of the sugar falls.

Sugar is required for the production of candy, so fall in the price of sugar will result in profit of candy selling and seller is willing to increase the production of candy.

RIGHT SHIFT AND LEFT SHIT OF SUPPLY CURVE

Rightward shift: If the cost of the production or cost of any raw material decline, the low cost will result in the increase in the production as the seller is willing to sell a larger quantity. This will increase the supply and the supply curve shifts right or outward.

Leftward shift: If the cost of the production or cost of any raw material increase, the high cost will result in the decrease in the production as the seller is willing to sell less due to less Profit. This will decrease the supply and the supply curve shifts left or inward.

Other variables that can shift the supply curve:-

1. Input Prices 
2. Technology
3. Expectation
4. Seller Behavior 

Image Ref:- https://www.businesstopia.net/economics/micro/supply-curve-movement-shift

Functional rather than attractive

     UTILITY :-

            The state or condition being useful is called as utility.

    According to Prof.Hibden " Utility is the ability of a good to satisfy a want".

    If a person consumes any good or service the amount of satisfaction or satisfying capacity which he derives from that good or service is known as utility.

    MARGINAL UTILITY:

         

                Marginal utility means additional satisfaction.If a consumer is deriving satisfaction by consuming a commodity the extra or additional satisfaction which he derives after consuming one more commodity is called as marginal utility.

  LAW OF DIMINISHING MARGINAL UTILITY:

        Additional satisfaction derived after consuming additional unit of commodity is called as marginal utility. If the additional units increases one by one then the amount of satisfaction derives decreases. Hence marginal utility diminishes. The more the additional units,the less the satisfaction level. 

        

       Utility diminishes over time. The diminishing marginal utility depends on individual tastes and preferences, so it differs from consumer to consumer.

EXAMPLE OF LAW OF DIMINISHING MARGINAL UTILITY:- 

       If a person is fond of ice creams he starts consuming ice creams for first ice cream his satisfaction level will be high it continues for three to four ice creams as he is fond of them. Later the satisfaction level will not increase for sixth and seventh ice cream his satisfaction levels starts decreasing.Gradually it falls down if he consumes more and more.Marginal utility starts diminishing.

LAW OF DIMINISHING OF MARGINAL UTILITY

As the use of an input increases (with other fixed inputs), a point will eventually be reached at which the resulting additions to output decreases.

MARGINAL UTILITY is derived as the change in utility as an additional unit is consumed.Utility is an economic term used to represent satisfaction.

Example of Diminishing Marginal Utility:

Suppose an individual purchases a bucket of KFC chicken having 10 pieces as she was hungry. After having 4 pieces she was satisfied as her hunger was over. She wasn't as hungry as before so the 5th piece has a smaller benefit and enjoyment as the first and she is now not hungry anymore.

In-fact the 5th piece has experienced a diminished marginal utility as well, as it is difficult to be consumed because the individual experiences discount upon being  full form food. The individual is so full that consuming the last piece results in negative utility. The last piece that demonstrate the decreasing utility that is experienced upon the consumption of any good. In a business application, a company may benefit from having three accountants on its staff. However, if there is no need for another accountant, hiring a fourth accountant result in a diminished utility, as little benefits is gained from a new hire.

DIMINISHING PRICES

As the utility of an product decreases as its consumption increases, consumers are willing to pay smaller amounts for more of the product.

LAW OF DIMINISHING MARGINAL UTILITY

Law of diminishing marginal utility:
It meant that if consumption increases initially it increases in marginal utility that then there will be decreasing in marginal utility . It will happens when there is difference shown in utility by consumption of additional unit and consumption is in large quantities,time will be in short period.
Eg: imagine you have gone to one bakery start eating sweets at first you have consumed 5 sweets and you feel  tasty with satisfaction after that you take another 5 sweets then you feel very good with highly satisfaction after that again you consume another 5 sweets then you feel that good but it is little bit decreased one after that again you consumer 5 sweets then you feel that I am fully satisfaction I can't go further, it will be in short period of time.
So the more you consume your interest will be decreasing this is diminishing marginal utility.

How much of a good is good?

The more of a good a person consumes during a given period of time, the less the additional utility derived from an additional unit of that good provided all other factors remain unchanged. In other words, over time the utility factor or relevance of any good when it is consumed successively diminishes.

For example a certain food item may satisfy the taste buds for the first time very well. If the same food item is consuming the second time, the satisfaction of consumption will be less than the satisfaction gained from the first time.

It can be also be found very evident in the fact that rich people tend to spend more carelessly. When a person grows rich, the person tends to spend more money on luxury goods.

There are other factors which determine at what rate the marginal utility of a product diminishes. The unique behaviour of a consumer dictates the rate of marginal utility. The shorter the time period in which a good is consumed also result in a quick fall in marginal utility.

CARDINAL UTILITY &ORIDINAL UTILITY

UTILITY:

The Satisfaction gained by the consumer through obtaining the goods&services provided

cardinal utility :

1.It can be measured in the terms of numbers such as 1,2,3,.......

2.It can be measured in units called UTILS

3.It is Quantitative in nature.

4.Only one food can be measured at a time.

EX:

Law of Diminishing Marginal Utility

Ordinal Utility:

1.It cannot be measured in the terms of numbers but can be measured in Ranks.

2. It cannot be measured in units.

3.It is Qualitative in nature.

4.Combination of goods can be measured.

EX:

Indifference Analysis

                

 

Measuring the satisfaction in terms of "UTILITY"

Utility: 

The term utility means the satisfaction derived from the consumption activities which can be an activity,any other activities and any hobbies.

The concept of utility is subjective in nature as it deals with the demand aspect and hence there are certain constraints attached.

Assumption:

• Here the people are considered with the rational behaviour.
• Tastes and preferences are taken fixed.
• It is assumed that people allocate their income in order to maximize the satisfaction.

Types of utilities:

Caridinal utility:

It means the utility measured in terms of giving number which can be quantified. As it is subjective in nature there are boundaries.

Assigning some numbers and those attributes are to be rated according to the boundaries given.

 Ex: ola drivers are given rating in order to know the level of satisfaction derived by the customer.

Ordinal utility:

This will be measured by assigning the ranks either ascending or descending. It is generally a comparative one which the conclusion will be given on taking certian group and identifying the level of utility derived. 

It can be done independently or the data can be taken from the cardinal measures.

Ex: Ranking the restuarants etc.,

Both has its own way if measuring but when compared ordinal utility tend to be used frequently.

DAIRY MILK SILK AS A DIMINISHING MARGINAL UTILITY

Diminishing Marginal Utility: -

Introduction: -

                             If a consumer consumes a product frequently in specific period of time, less additional utility he gets from an additional unit of the product.

TABLE INDICATING MARGINAL UTILITY AND TOTAL 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.

 GRAPH INDICATING MARGINAL AND TOTAL UTILITY FOR NUMBER OF UNITS CONSUMED

EXAMPLE: -

1.          Did you ever tried eating 3 big at a Dairy milk silk with in less time? 
2.          Did you used entire data provided by the jio?

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

consumer satisfaction

WILLINGNESS TO BUY AND CONSUMER SATISFACTION:

. The satisfaction of people derives from their consumption activities

ASSUMPTIONS:

. Tastes and preferences are fixed and given, and play a large role in decision making

. People allocate their income to maximize their satisfaction

CARDINAL UTILITY:

Cardinal utility approach is measurable and the customer can express his satisfaction in cardinal numbers such as 1,2,3…

ORDINAL UTILITY:

Ordinal utility states that the satisfaction which a consumer derives from the consumption of product or service cannot be measured numerically.

How we Can Measure Consumer & Producer Surplus

Consumer Surplus: The difference between the maximum amount consumer willing to pay for the goods or services but the amount actually paid is called Consumer Surplus.

Producer Surplus: The difference between the amount producer willing to sell the goods and services but the producer actually sold is called Producer Surplus.

This can be explained by taking Yippee Noodles of ITC Product as an example of measuring consumer surplus and producer surplus.

1. The above shows that the Demand and supply are equal at the equilibrium point.
2. Consumer Surplus of the product can be calculated by Consumer Surplus = Max price willing to Pay - Actual Price, Consumer Surplus is graphically shown as the area under the Demand Curve and above the Equilibrium point.
3. Producer Surplus of the product can be calculated by Producer Surplus = Actual Price sold - Willing to sell, Producer Surplus is graphically shown as the area above the Supply Curve and below the Equilibrium point.

LAW OF SUPPLY

The amount of good that seller are willing or able to sell that is called quantity supplied. There are many way to find quantity supplied of goods. But price plays major role in our analysis.
               If price of a good is increase then business of that is profitable. So seller of that good works many time and hires many workers.
                In the other hand if price of good decrease then business of that good is less profitable. So seller produces less goods and some seller shut down theire business as their quantity supplied is zero.

         The relationship between price and quantity supplied is called LAW OF SUPPLY.
       Example- in marriage season the price of saree is increase as demand of saree is too high that time so business of this good is profitable and businessman opens shop more time and hire many salesmen. So quantity of supply is high also.
         In simple word if price of a good is increase then quantity of supplied of good is going to high and if price of good is decrease then quantity of supplied of good is going to less.

Utility, its Measures and Characteristics

Utility Meaning - The clear meaning of ‘utility’ is ‘usefulness’ i.e what is value to you or the satisfaction people derived from any activity. Example likes Hobbies, past times, profession etc. In economics utility is the capacity of a commodity to satisfy human wants.

Measurement of Utility - 
Utility can be measured as :

1) Cardinal Utility : Cardinal Utility is the type of Utility which measures the capacity in numbers i.e it quantifies the things in length , breadth , height etc.

2) Ordinal Utility : Ordinal Utility is the type of utility which decides the rank or we can say  assignment of rank is done in ordinal utility. Ranking is done independently.

Utility Characteristics -

# Principle of diminishing marginal utility - The more of a goods that one obtain in a specific period of time, the less the additional unit of the goods.

# Utility diminishes over time - The shorter the time period, the more quickly marginal utility diminishes.

# Consumers are not identical - The rate at which marginal utility diminishes depends on individual tastes and preferences and so differs across consumers.

CONSUMER'S APPROACH TO UTILITY OF A PRODUCT

TYPES OF UTILITY

Defination:

Utility is nothing but the ‘usefulness’ of a product or any sevices to satisfy human wants.

Types of utility:

1.       Cardinal Utility:

It is the numerical expressions derived by the consumers after the consumption of goods or services. Which mainly focuses on the ‘quantative’ approach, and can be analysed by the method of ‘marginal utility analysis’.

for eg:

2.       Ordinal Utility:

It is the ‘qualitative’ approach derived by the consumers for the goods and services they consume. It is measured by comparing in terms of ‘rank’. And can be analysed by indifference curve analysis.

for eg: Suppose a person prefers apple to banana and banana to grapes. Hence he or she can be subjectively, his/her preferences i.e., apple>banana>grapes 

Concept of Utility

Utility depends on the satisfaction or benefit that an individual  gains from consuming a given amount of goods or services in an economy. Though utility varies from people to people or excessive usage or due to over time usage. The shorter the time period the more marginal utility diminishes.
Example- Music Industry

Experiencing the LAW OF DIMINISHING MARGINAL UTILITY

In my life I recently experienced the law of diminishing marginal utility before going to explanation first lets know that marginal utility is that "The more of a good that we consume in a small time period the utility derived from an additional good is less compare to the first one".
   
       Coming to the experience its already a month I joined in an institution far away from my home and I generally like potatoes and chapati's. During the first few days I really enjoyed the potato items in mess there I can say  at that I am getting good utility from them. And slowly days are going on and my interest in potatoes also decreasing slowly one day by other.
        This is because I am having potatoes 2 times everyday so, this reduces the utility that I get from them. This experience tells about the law of diminishing marginal utility in my real life.

UTILITY AND LAW OF DIMINISHING MARGINAL UTILITY

Utility

         It’s the satisfaction of people derived from their consumption of goods in a particular period of time.

Utility is subjective concept and it varies from people to people and time to time. The utility of a particular good is going to influence the demand and also price.util is the measure of utility.

For example a person evaluates that a piece of pizza will give 15 utils where as the bowl of oats will give 20 utils then that person knows that eating of oats is more satisfying. From producer side they may increase the price of oats slightly higher than pizza.

Marginal utility

Marginal utility is defined as the change in utility when extra unit is consumed.

For example if the utility of first piece of cake has 10 utils and second piece has 7 utils, the marginal utility(mu) of eating the second piece is 7 utils.

And also consumers are not identical the rate at which marginal utility diminishes is depends upon individual taste and preferences.

Law of diminishing marginal utility

Suppose a person wants to eat 5 apples one by one. The first apple gives him 15 utils and when he eats second apple it gives him 12 utils. When he consumes third and fourth apple, the marginal utility of each extra apple he eats will be lesser. With the increase in consumption of apples, the consumer wants fall.

               The law of diminishing marginal utility derives that as the usage of the goods rises, the utility derived from each extral unit decreases.

LAW OF DIMINISHING RETURNS

LAW OF DIMINISHING RETURNS

As the use of an input increases (with other inputs fixed) a point will eventually be reached at which the resulting addictions to output decrease.

STAGE 1-  Total product and Average product will increase; marginal product is first increasing and then decrease.

STAGE 2- Total product is increasing; Average product and Marginal product is both decreasing.

STAGE 3- Total product is diminishing; Average product is decreasing; Marginal product is negative.

Monotony a cause of Diminishing Marginal Utility?

Before understanding the relationship of monotony and Diminishing marginal utility let's discuss the few terminologies that is needed.

Marginal utility is what additional satisfaction a customer will get from buying extra goods or services. So, Diminishing marginal utility is basically the situation when consumption of repeated goods will slowly reduce the utility that the customer would get from the first consumption and subsequently reduce

As human behaviour suggest most of us get boredom from monotony. Let's take an example, we will love to have out favourite food. But if we get our favourite food in every meal we will slowly lose that love or satisfaction. And because of this monotony the satisfaction of consuming that product will reduce subsequently. So from this example we can deduce that Monotony in many cases is a major cause of diminishing marginal utility.

Law of Diminshing Marginal Utility

Utility:
          The power of satisfaction obtained from the consumption of a product.
Diminishing marginal utility:
       Diminishing marginal utility refers to the decrease in the demand of the product when the consumption of the good increases by the consumer.
Definition:
   The additional benefit which a person derives  from a given increase of his stock of a thing diminishes with every increase in the stock that he already has.
                                                                                                                     -Alfred Marshall


Ex:
 If the consumer is hungry he wants to eat a chocolate he eats the first chocolate and gets more satisfaction but coming to the second chocolate his satisfaction decreases when compared to the satisfaction which he derived from the first one.If the consumption increases  his satisfaction decreases.


                

law of Diminshing Returns

Diminishing Returns:-

The reduction of consumer satisfaction when the no. of inputs consumed increases after a certain point is known as diminishing returns.

Use of an input increases ( By keeping all other inputs constant ) till the saturation point and will eventually decrease with the addition of inputs.

Stage 1: Total product and average product increases, Marginal product is first increasing and then decreasing.
Stage 2: Total product is increasing, Both average product and marginal product decreasing.
Stage 3: Total product is diminishing, Average product is decreasing and marginal product is negative.

If all inputs into the production process are doubled, three things can happen:-

1. Output increases more than proportionately with an increase in the inputs- Increasing returns to scale.

2. Output increases in the same proportion as of the inputs- Constant returns to scale.

3. Output increases less than proportionately with an increase in the inputs- Decreasing returns to scale.

CONCEPT OF MARGINAL UTILITY

     We the people spends our money on our needs, satisfaction and comfort. Also sometimes we take extra unit of that needs if our satisfaction is not fulfilled. We never hesitate to pay extra money if our satisfaction exceeding our budget but when the budget exceed the satisfaction level of extra unit consumption,we think whether to go for it or not. Basically if we tell the marginal utility goes on diminishing.

      Marginal utility defined as the extra amount of satisfaction that we get from the consumption of one extra unit. Marginal utility is a useful factor, it helps to determine how much a consumer will buy. It goes towards positive when consumption of extra unit increases the total utility and going towards negative when consumption of extra unit decreases the utility.

      Let's take an example of a man who is very thirsty and buy 4 glass of juice to drink. When he will take the first glass of juice, he will be very satisfy, it has a higher benefit for him. But when he will take the second glass of juice probably he will not as much as satisfy  as the first one and the third one carry very less  utility then the second glass also and the individual is now no more thirsty .

Now the fourth glass of  juice gone through a diminished marginal utility and it  is difficult to drink by the individual. Finally it cannot be consumed  and results in a negative utility. 

     

Production Functions

Concept of Production Functions

Production function shows the physical relationship between input and output.

Production function shows how much output we can get if we have sufficient amount of capital and labour. In production raw material converted into goods. Here raw material can be anything depends upon the nature of business. The aim of production is to maximize the profit, and to get the most profit with least cost we need the best combinations of production factors.

Where, Q = f (KL)

Q = Output

K = capital

L = labour

Here output is depending upon the different inputs available in the firm, here are only two inputs, Capital (k) and Labour (L). There can be many factors that are responsible for the different output depends upon the nature of firm.

Satisfaction of consumer and his willingness to buy

The concept of utility:

The satisfaction that people derives from their consumption activites

Utility can be measured using ‘utils’

There are of two there are :

1)Cardinal Utility:

Those things which are quantitative to measure(numbers)

Example: sita gets 20 utils of satisfactions from apples

2)Ordinal Utility:

Its is more easier as it facilitates easy completion ,in this we prefer ranking

Example: ram gets more satisfaction by eating orange than apples

Assumptions:

a)taste and preference are fixed and play a large role in decision making

b)people allocate their income to maximize their satisfaction

example: i and my friend suddenly went to movie without planning

Utility Characteristics :

• ·         principle of diminishing marginal utility:

           Example: In US OSCAR awards many celebrities wear new style of dress .withinfew days imitation will come and it works for some days because everyone wearing that satisfaction level decreases

• ·         Utility diminishes over time :

             The shorter the time period the more quickly marginal utility diminishes

             Example: mobiles in the market , emerging new trends easily diminishes

• ·         Consumers are not identical:

            The rate at which marginal utility diminishes on individual tastes and preferences and differs across consumers

Economics rolls

Economics have two roles.
1- scientific
2- policy advice
1-scientific - They are provide the develop and test theorist explained the world them.
2- police advice - They are provide the theories explain the world around them.
Supply and demand are using various types of government policies. Considering policies are directly control the price. For example, rent control laws dictate a maximum rent that landlords may change tenants. Minimum wage laws dictate the lowest wage that firms may pay workers.

Some basic utility concepts to be known

Utility: It is usually used for the description of the degree of satisfaction. We can understand it as the commodity power to satisfy the customer needs.
For example, Imagine a hungry person buys a biscuit packet expecting that the biscuit packet will fill his stomach. This means that the biscuit packet has a utility.
Utility is divided into two types for better understanding.
They are as follows:- 1. Cardinal utility. 2. Ordinal utility.

Cardinal Utility: It is a utility in which the utility is measured through cardinal approach i.e, the satisfaction derived by the customer by buying the good can be expressed numerically. It is a quantitative concept.
It has a psychological unit called Util. It is not taken as a standard unit because it will vary from place to place and time to time. It is less realistic.

Ordinal Utility: It is a utility im which the utility can clearly be expressed in terms of rank i.e, the satisfaction derived by the customer by buying the good cannot be expressed numerically. It is a qualitative concept.
It is measured in ranks. It is more realistic. 

PRINCIPLE OF DIMINISHING MARGINAL UTILITY:

                              The more of a good that one obtains in a specific period of time, the less the additional utility derived from an additional unit of the good.That means as we consume anything more the utility we obtained from that product is less when compared to the utility obtained from the product we consumed before.

EXAMPLE: If we consume one apple we get 20 units of marginal units and we consume 2nd apple we get 18 units of marginal utility.That means as we consume more number of apples we get less units of marginal utility.Because, if we consume one apple it tastes more, but if we consume 2nd apple it tastes little less when compared to 1st one and if we consume 3rd apple it tastes was very less when compared to 2 apples we consumed before.Like that as we consume more apples at a time we cannot feel good taste as we get from the first apple.This can be shown clearly in the following:

          NO. OF APPLES       MARGINAL UTILITY
                    1                                 20
                    2                                 18
                    3                                 16
                    4                                 14
                    5                                 12

From the above, we know that as the consumption of units are increasing the marginal utility was decreasing when compared to the amount of utility we obtained earlier.

utility characters

Utility:
Utility may deffer form person to person,time to time,and place to place
There are Three types of utilities.They are

1. Initial utility 
2. Total utility 
3. Marginal utility 

Initial utility :The  satisfaction derived from the consumption of first unit of any product is known as initial utility 

Total utility:The total satisfaction derived from an consumption of any product is know as total utility 

Marginal utility:The satisfaction obtained from consumpting one additional unit of any product is known as marginal utility 

The utility diminishes over time the shorter the time period the more quickly marginal diminishes.consumers are not same at the rate which mu depends upon the individual tastes and preferences and it may also differ among the consumers 

We can also measure the utility in the terms of units known as utils.which represents the satisfaction of an consumer at consuming one particular goods

Ratings and Rankings on Utility

Consumers are assumed to be rational. He is the ultimate person who consumes the goods or services which is also called as utility of the goods by using income and commodity prices. To understand the behaviour of consumers there are several theories that are developed. There are mainly two types of utilities are there. They are 1) Cardinal Utility
                                            2)Ordinal Utility

Cardinal Utility :
1) Cardinal utility is also called as Utility Analysis.
2) It enables customers to rate the magnitude of how much they prefer one good to another.
3)  Giving different choices a specific utililty value.
4) It is all about ratings.
5) It gives a value to different options.
6) Measuring values to satisfaction.
7) It is less realistic.
8)Here utility is measured in 'UTILS'.
9) It is quantitative.
      Example : Smitha yields 90 utils on icecreams and 30 utilis on cake.
Ordinal Utility :
1) Ordinal utility is also called as Indifference curve utility.
2) It doesnot try to give the magnitude of how much a consumer prefers a good.
3) Ranking choices by order of preference.
4) It is about rankings.
5) It ranks in terms of preferences.
6)Cannot measure the satisfaction.
7) It is more realistic.
8) Here utility is based on satisfaction.
9) It is qualitative.
         Example : Smita likes icecreams more than cakes.

Elasticity of Demand

Elasticity of demand :

The  change in the responsiveness of demand in respect to the inflation & deflation in the price of the given commodity.

             Ed = Relative change in demand

                         Relative change in price

Kinds of Elasticity of demand :-

1.     Price elasticity of demand :-

The movement/ change in the Quantity demanded of a commodity due to the movement/ change in its price.

Types of Price elasticity :-

a)     Perfectly elastic demand :A small fall in price leads to infinite increase in quantity demanded and vice versa.

                          Ed= Infinity

b)    Perfectly inelastic demand :No impact  on demand if there is any fall in price of the good.

                          Ed = 0

c)     Relatively elastic demand : A very small fall in the price leads to substantial change in demand & vice versa.
                     Ed > 1

d)    Relatively inelastic demand :Is there any big fall in price will have moderate change in demand of commodity.

                          Ed< 1

2  2.     Income elasticity of demand :- 

           The ratio of proportionate change in the Quantity demanded of the commodity to a        given proportionate change in the income of consumer.

3  3.     Cross elasticity of demand :-

     The responsiveness of the demand for one commodity such as X to the change in           the price of another commodity Y.

UTILITY AND PRODUCTION FUNCTION

UTILITY -

value for money Derived by a person From the goods and services or a person from the consumption goods or services or a particular place which Economic are motivated is called utility .

PRODUCTION FUNCTION -

production function shows the relationship between the Quantity of output and Different Quantity of input .

Precise idea about Marginal Utility.

Before getting into “Marginal Utility” one should know what actually “Utility” mean.Utility refers the state of being useful,profitable or beneficial.According to economics it is known as the satisfaction people derive from their consumption activities.People allocate their income to maximise
their satisfaction or total utility and thats the reason why income also plays an important role in utlity of a product or commodity.Utility will directly influence the demand and price of that goods or services.The day to day example of utility are water,electricity,foods etc.

In the other hand “Marginal Utility” is the additional bit of satisfaction or amount of utility,gained from each extra unit of consumption.
Lets take an example,Tukul really loves biriyani.Each time Tukul eats a spoon of biriyani,she feels a certain amount of satisfaction.The second spoon of biriyani brings,more satisfaction than the first,and the third spoon of biriyani is more satisfying than the second.However by the time Tukul eats the last spoon of biriyani,the amount of satisfaction is much less than the first few intakes.

By the above example we come to know about the principle of Diminishing marginal utility.It states that the more of a good that one obtains in a specific period of time,the less the additional utility derived from an additional unit of the good.Utility diminishes overtime the shorter the time period,the more quickly marginal utility diminishes.As consumers are not same the marginal utility diminishes depends on individual tastes and preferences.The total amount of satisfaction or benefit gained from the consumption of each good or service is the total utility.

Marginal Utility formula=Change in Total Utility/Change in number of units consumed
.
Lets look back at Tukul and her biriyani,the total utility decreases by the time the last spoon of biriyani is consumed as Tukul starts to feel full.This change in total utility as each spoon of biriyani is called its Marginal utility.

Indifference curve

Indifference curve :-

                     It is defined a curve that display combine of goods by which consumer gives same utility.Every point in this curve shows that consumer between two and every points indifferent gave him same utility.

              Combinations products can be an Indifference curve in which assumed  to give a increase in total utility.It is a model that compares demand of a good to another good.If a competitor increases the price of a good ,we will see type of impact on that particular good pn the basis of this Indifference curve,I can also increase the price like him i know that i will lose relativity in the market share.

Properties of Indifference curve :-

1.Downward sloping
2.convex to the origin
3.Higher the indifference curve
4.Tangent

Assumptions of Indifference curve :-

1. Two commodities
2.Non satiety
3.Ordinal utility
4. Dimisnishing marginal rate of substitution
5.Rational consumers

LAW OF DIMINISHING RETURNS

WHAT IS LAW OF DIMINISHING RETURNS?

Diminishing returns is the decrease in the marginal output of a production process. It states that in a production process as one input variable is increased there will be a point at which the marginal per unit output will start to decrease, holding all factors constant.

Reference- www.economicsdiscussion.net

we can understand by graph-

Stage 1- Total production and Average production increase; Marginal Production is first increasing and then decreasing.

Stage 2- Total Production is increasing, Average production and Marginal production both decreases.

Stage 3- Total production is diminishing, Average production and Marginal production both decreases.

Cardinal utility and ordinal utility

                                       CARDINAL UTILITY

                                     Helps the customers to measure the preferences of goods.

1. The customers satisfaction can be measured using cardinal utility.
2. the 'util' is used as measuring unit of cardinal utility.
3. 1 util = 1 unit of money
4. For example Ferrari car gives 5000 units of utility and BMW car is giving 3000 units of utility(marginal cost=marginal utility)         

                                            DEMAND CURVE SHOWING CARDINAL UTILITY

ref : economicshelp.org

ORDINAL UTILITY

                                      Helps the customers to select the product through ranking

1. when we are using ranking we are using ordinary utility
2. In ordinal utility, the consumer only ranks choices in terms of preference but we do not give exact numerical figures for utility.
3. for example we prefer BMW car to Ferrari car,but we don't say how much.

                                      

CAN BENEFIT'S BE MEASURED?

Utility can be defined as the satisfaction consumers get after consuming a good or services . It varies from one person to another as it all about the person's behaviour. The utility is measured in terms of "UTILS" . There are two principles theory of utility:

1. CARDINAL UTILITY :  Satisfaction survey the consumer for the using of goods and services can be expressed numerically. Cardinal utility is less realistic, as it is measured in terms of quantitatively like height, length etc or 1,2,3,so on.

                                                 The Cardinal utility was formulated by non classical economist,and the measurement of its is also known as "RATING".

EXAMPLES: ● Ratings for movies in IMDb
● As a customer we can give Flipkart and Amazon ratings.
●After watching a movie we can give ratings in BookMyShow application.

2. ORDINAL UTILITY:  The satisfaction which shown by the consumer,for the usage of goods and services which cannot be expressed numerically. Ordinal utility is more realistic as measured in terms of ' less than' or 'more than' .
                                   The the measurement is also known as '"RANKING" it is put forward by the modern economist.

EXAMPLES: ● We can give ranking in Billboard top list.
● Student are given ranks in AICTE.

THE PRODUCTION FUNCTION

Maximum output Q that a firm can produce for every specified combination of inputs.

Labour (L)
Capital (C)
Q = F (K, L)

In other words production function is the relationship between the quantity of inputs used to make a good and the quantity of output of that good.

The short run refers to a period of time in which one or more factors of production can not be changed factors that can not be varied over this period are called fixed inputs.
Ex - labours

Long runs refers to the period where in all the inputs are variable.
Ex - capital

Consumer trends in the automobile industry

It’s no surprise to state that the car market is VERY competitive. In 2016, 44 automotive brands were offering nearly 400 different model types to UK consumers.

Keeping up with consumer expectations in an increasingly crowded market is difficult, especially as an industry which has lengthy production cycles. Time to market stretches over many years. A vehicle that looks like a perfect product market fit at conception, might find that the market has changed by the time it rolls off the product line.

Likewise, once a vehicle is in the market it’s there for many more years.

Manufacturers can’t easily roll back the production line to make changes or match the speed that other industries can.

However, the slow pace of time-to-market can also be a huge opportunity for automotive brands. Innovative vehicles that address gaps in the market can enjoy years of success while the competition scrambles to catch-up.

Like Tesla (world’s largest electric car producer) they can keep their production pace slow because they are not only producing a car full of new technology which is affordable and environment friendly and they are the leaders when it comes to selling electric cars so consumers won’t mind waiting like how the consumer waited for tesla model X the consumers even paid at the release of model X concept and waited for about 2 years for it.