Economics

Definition: The law of Diminishing Marginal Utility posits that with the more and more consumption of the units of the commodity the utility derived from each successive unit goes on diminishing, provided the consumption of other commodities remain constant. The concept of the law of diminishing marginal utility can be understood through a real life example. Suppose you are … [Read more...] about Law of Diminishing Marginal Utility

Definition: The Marginal Utility refers to the additional benefit (utility) a consumer derives from the consumption of one additional unit of good or service. In other words, marginal utility is the addition to the total utility resulting from the consumption of one additional unit of the commodity. Thus, it can be measured as the change in the total utility obtained from … [Read more...] about Marginal Utility

Definition: The Total Utility refers to the sum of utility that an individual derives from the consumption of all the units of a given commodity at a point or over a period of time. In other words, the total satisfaction derived from the consumption of various units of goods and services is called total utility. Every unit of a commodity has its marginal utility (a utility … [Read more...] about Total Utility

Definition: The "Utility" in Economics means the satisfaction derived or expected to be derived from the consumption of goods and services. The concept of "utility" in economics can be understood in two broad perspectives: from the product’s perspective and the consumer’s perspective. From the product’s perspective, it can be defined as the want-satisfying property of the … [Read more...] about “Utility” in Economics

Definition: The Law of Supply posits that there is a positive relationship between the supply of a commodity and its price, such that the supply of the commodity increases with the increase in its price and decreases with the fall in its price, other things remaining constant. Here, “other things” are the factors that influence the supply of the commodity such as technology, … [Read more...] about Law of Supply

Definition: The Elasticity of Demand is a measure of sensitiveness of demand to the change in the price of the commodity.  Determinants of Elasticity of Demand Apart from the price, there are several other factors that influence the elasticity of demand. These are: Consumer Income: The income of the consumer also affects the elasticity of demand. For high-income … [Read more...] about Determinants of Elasticity of Demand

Definition: The Price Elasticity of Demand is commonly known as the elasticity of demand, which refers to the degree of responsiveness of demand to the change in the price of the commodity. Types of price Elasticity of Demand The following are the main types of price elasticity of demand: Perfectly Elastic Demand (Ep = ∞): The demand is said to be perfectly elastic … [Read more...] about Types of Price Elasticity of Demand

Definition: The Elasticity of Demand measures the percentage change in quantity demanded for a percentage change in the price. Simply, the relative change in demand for a commodity as a result of a relative change in its price is called as the elasticity of demand. Types of Elasticity of Demand Price Elasticity of Demand: The price elasticity of demand, commonly known … [Read more...] about Types of Elasticity of Demand

Definition: The Elasticity of Demand is a measure of change in the quantity demanded in response to the change in the price of the commodity. Simply, the effect of a change of price on the quantity demanded is called as the elasticity of demand. Marshall, a renowned economist, has suggested a mathematical method  to measure the elasticity of demand: According to this … [Read more...] about Elasticity of Demand

Definition: The Law of Demand asserts that there is an inverse relationship between the price, and the quantity demanded, such as when the price increases the demand for the commodity decreases and when the price decreases the demand for the commodity increases, other things remaining unchanged. In the definition, the “other things” are the factors that influence the demand … [Read more...] about Law of Demand