Economics

Definition: The law of diminishing marginal utility explains that with the consumption of each subsequent unit of a commodity, the satisfaction anticipated or derived from it goes on declining. The point at which the consumer no more feels the need for consuming a particular product is referred to as the 'Point of Satiety'. This is the point where the marginal utility curve … [Read more...] about Law of Diminishing Marginal Utility

Definition: Marginal utility (MU) is the utility acquired from consuming an additional unit of a commodity. Utility refers to the ability of a product to fulfil a person's need, want or desire, which keeps on diminishing as the following unit of a commodity is consumed. Formula of MU Though a utility cannot be measured in exact numbers, it is up to the consumer to represent … [Read more...] about Marginal Utility (MU)

Definition: A budget line is a straight line that slopes downwards and consists of all the possible combinations of the two goods which a consumer can buy at a given market price by allocating all his/her income. It is an entirely different concept from that of an indifference curve, though they are both are essential for consumer equilibrium. The two essential components of … [Read more...] about Budget Line

Definition: An indifference curve is a convex shaped curve depicting the graphical representation of the different combinations deriving the same level of satisfaction to the consumer by considering two commodities. It functions on the principle of the diminishing marginal rate of substitution (MRS). Example: A person went to the grocery store to buy cereals and … [Read more...] about Indifference Curve

Definition: Moral suasion is a step taken by the central bank for convincing and advising the commercial banks to adhere to the policies and act in the desired manner through general interaction. 'Moral' means defining one's code of conduct based on a clear distinction between right and wrong. 'Suasion' refers to the process of advising, convincing or influencing others without … [Read more...] about Moral Suasion

Definition: Opportunity cost refers to the value of the other choice sacrificed while choosing a better or suitable alternative. It is also termed as alternative cost. There are limited resources or limited spending capacity and to direct these resources in the direction of deriving maximum satisfaction, we find out the opportunity cost. Example: Let us now understand the … [Read more...] about Opportunity Cost