MusT-Know Economic

Concepts For
Aspiring Consultants
 Demand & Supply
When demand for a product exceeds its supply,
suppliers must either increase supply or raise
prices. As prices rise, demand should fall as the
number of individuals who can afford it
decreases. In this approach, providers buy time
to get back into action and meet demand.
When supply exceeds demand, suppliers must
either cut back on their supply or lower the
pricing of the things they sell. Remember that
manufacturers now have an excess inventory.
As a result, as prices fall, demand will increase
and equalize supply.
Finally, equilibrium is reached when both supply
and demand are optimal.
 Law Of Diminshing
Marginal Utility
This law highlights that a customer's
demand for a given product
decreases with each successive unit
consumed. Eg - You after consuming
1 unit of chocolate won't derive as
much satisfaction/utlity from the
2nd unit of chocolate. The concept of
diminishing marginal utility is critical
in consumer purchase decisions.
 Veblen Goods
These are the items that are
regarded a status, esteem, or
luxury symbol. These are items for
which customers are willing to pay
a premium. Rolls Royce, Jewels,
and iPhone are common
examples. The greater the price
difference, the greater the desire
to obtain these things. Customers
use this to demonstrate their
social standing.
 INFERIOR GOODS
Inferior goods are offerings which
are consumed by users because of
their low income levels. If their
income rises, they will stop
consuming this type of good and
replace it with a better offering. Eg:
You consuming a non-branded
instant noodles brand because it's
economical for you. If your income
rises, you might switch to Maggi
Aata noodles.
 Giffen Goods
Giffen goods are necessities/required
things whose price increase has
little effect on their demand. These
are non-luxury goods which are
bought by the buyers even at a
higher price because they have no
ready substitutes available and
their consumption is critical. For
instance, Water or Salt or Medicine.
Despite an increase in price, these
things are essential for us to
consume.
 Income & DEMAND
Elasticity
As your income rises, so does
your demand for better things.
Furthermore, when income falls,
so does demand. Typically, when
a consumer's income rises, they
will demand more of an offering.
Inferior goods, however, are an
exception. Their consumption or
demand falls when the
customer's income rises.
 Opportunity
Cost
A customer who is also a decision-
maker has finite resources (money) but
unlimited options (opportunity) on how
to spend them. The opportunity cost is
the expense a consumer incurs by not
selecting the best possible alternative.
This is assuming that the options are
mutually exclusive. For example, you
taking the entrepreneurship plunge
has an opportunity cost equal to the
salary you were getting in your
corporate job.
CAREER EDGE

CONSULTING FELLOWSHIP
Mentors from

2.5 or 6 months, 10 mentors, and 30+ hours of live

mentorship on Consulting careers, CV making
(including 1:1 edits), Guesstimates & Case Interviews.
Rigorous interview practise through real-time
guesstimates solving & buddy teams for mock cases.

Placement Assistance through access to employee

referrals by our consulting mentors. Job opportunities
from our hiring partners.

Live case project (& certificate) with a real life client &
business problem. CV templates & interview
preparation resources along with 1:1 Mentorship.

SIGN UP (Registration Link is in

the comments)