Wants:
Human wants are the starting point of all economic activities. Wants refer to the lack of satisfaction, a state of discomfort, which every individual desires to eliminate.
They can be classified into Necessities, Comforts and Luxuries.
They are unlimited. All wants cannot be satisfied simultaneously and fully.
But resources to satisfy them are limited and scarce. These resources have alternative uses.
The allocation of scarce means having alternative uses to meet our unlimited wants is fundamentally the problem of economics.
Utility:
Utility is the capacity of a good to satisfy human want. This is a relative and subjective concept because the same good appears to possess different utility to different individuals at different places and different times.
Total utility means aggregate of utilities derived from consuming all the units of the commodity. Marginal utility is the additional utility by consuming one more unit of the commodity. Hence Total utility is summation of all marginal utilities.
Thus,
TUn = MU1st + MU2nd + MU3rd ........+ MUnth
... TU= ∑ MUs
Whereas marginal utility is MUnth = TUn – TUn-1
Marginal utility goes on diminishing as the consumer goes on consuming unit after unit of that commodity. This phenomenon is called the Marshallian Law of Diminishing Returns.
Demand:
In economics desire backed by purchasing power is the demand. The purchasing power depends on the level of prices and the disposable income of the consumer. Therefore, demand is the desire of the consumer to buy and it depends on his ability to pay as well as his willingness to pay.
Demand = Desire to buy + Ability to pay + Willingness to pay
Human wants are the starting point of all economic activities. Wants refer to the lack of satisfaction, a state of discomfort, which every individual desires to eliminate.
They can be classified into Necessities, Comforts and Luxuries.
They are unlimited. All wants cannot be satisfied simultaneously and fully.
But resources to satisfy them are limited and scarce. These resources have alternative uses.
The allocation of scarce means having alternative uses to meet our unlimited wants is fundamentally the problem of economics.
Utility:
Utility is the capacity of a good to satisfy human want. This is a relative and subjective concept because the same good appears to possess different utility to different individuals at different places and different times.
Total utility means aggregate of utilities derived from consuming all the units of the commodity. Marginal utility is the additional utility by consuming one more unit of the commodity. Hence Total utility is summation of all marginal utilities.
Thus,
TUn = MU1st + MU2nd + MU3rd ........+ MUnth
... TU= ∑ MUs
Whereas marginal utility is MUnth = TUn – TUn-1
Marginal utility goes on diminishing as the consumer goes on consuming unit after unit of that commodity. This phenomenon is called the Marshallian Law of Diminishing Returns.
Demand:
In economics desire backed by purchasing power is the demand. The purchasing power depends on the level of prices and the disposable income of the consumer. Therefore, demand is the desire of the consumer to buy and it depends on his ability to pay as well as his willingness to pay.
Demand = Desire to buy + Ability to pay + Willingness to pay
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