In our daily lives, we unknowingly bring together various combination of different fields of studies to carry out our daily tasks and make it through the day. With Math, Physics, Chemistry and other such subjects leaving very distinguished signs of their presence, some studies and concepts are hidden and need a much closer look to be revealed.
Economics is such a subject, it is considered to be a bit too complicated by students everywhere. This, however, does not hold true. Economics has its applications integrated in our daily lives on very deep levels. Almost every other decision we make is based on economics, be it getting grocery from your local mart, or deciding on what place to visit during your vacations.
Economics, What Is It?
Economics, to be exact is simply a study that explains how people, businesses and institutions make use of their resources in the most efficient manner. These resources are not necessarily monetary, and may also include skill sets and time. Economics is important to understand so that we could make informed decisions about where to invest your resources, in order to receive maximum returns. For instance choosing to invest time in an activity which would help you develop a skill set, which might later create job opportunities for you.
Economics of daily life is the utilization of resources available to us on everyday level, in a way which would benefit us the most.
Basic Economics Principles Applied In Daily Life:
Supply And Demand:
Supply can be defined as the ability of a milk man to provide you milk, where as demand is the ability to buy it from the milk man. Similarly Supply and Demand revolves around the concept that both the seller and buyer, reach a mutual level that suits both the parties before they exchange goods in exchange of money.
It is a concept of economics which says that over time, a particular utility would increase in value. For instance the utilities bought for $25 10 years ago, cannot be bought today because of inflation.
A much related concept to inflation is that of purchasing power. It essentially means the ability to buy a particular product at a particular time. As the inflation rate increases, the purchasing power of an individual may decline.
A declined purchasing power would cause people to buy lesser goods or services for the same amount of money as they could have 10 years ago.
Opportunity cost is the cost you pay when you choose one product, or service over other, for instance the opportunity cost of sleeping in and missing your lecture might include directly the tuition fee you paid for that lecture, but along with it, it would also cause you time, and extra efforts to catch up to the rest of the class, and in case of a test, you might lose marks as opportunity cost.
When people have unlimited wants, but the resources to fulfill those wants are less they cause scarcity. The resources which may go scarce are time, money and everything that is finite, including the natural resources. Scarcity is an important economics concept that allows is to determine the value of a product or service. For instance, in economics of daily life, if a product is scarce, it would be demanded more, and hence would be more expensive.
Buying Something With The Most Satisfaction Level
When we talk about economics and its effects in our daily lives, we always buy products such as Simply Thick Nectar or Windows, whatever it may be that’s serving its purpose the best. Economics realize the importance of a good experience and its necessity for further decisions that need to be taken, before we spend further money on a similar product.
Economy believes that only highest levels of satisfaction, in terms of quality, and its value for money, may cause repeated buying behavior. Marginal benefits versus the marginal cost of the service or good needs to be evaluated as per economics.
Behavior And Bias
As per the traditional theories of economics humans are capable of buying very rational decisions. However, the behavioral economic implies something completely different and new. The behavioral economic believes that humans are capable of doing present bias while taking a decision. This could be best defined by the ability to do stuff that brings pleasure right now, and future implications are ignored. For instance, the impulsive buying may present you with a satisfaction for now, but in longer run it will not be considered as a smart decision.
A present bias is a decision that your future-self would not make, and if we are aware of these bias, we are likely to take much smarter and insightful decisions that would help us in enjoying benefits even in the future. This behavioral implication and bias is very commonly seen in the economics of daily life.
No Black And White
In economics, there is no definitive answer, each solution or explanation varies from situation to situation, and with respect to complete picture of the situation. For instance when it comes to government taking loans it could be good and bad. Bad if these loans are to pay the elderly their pensions, where as it could be extremely good in times of recession and help your country grow.
In behavioral economics, the diminishing effects play a very strong role in your economics of daily life. For instance if eating pizza gives you a feeling you’d rate 5/5, you’ll be surprised to rate it 1/5 if you eat it twice in the same day, and may fall sick after having it for the third time in the same day, hence the satisfaction fell down and eventually turned negative. Similar is the case with money, a lot of money makes us lose interest in money, as we work more to earn more money, and have less or no time to enjoy the luxuries we can afford with that money.
Sales And Discounts
Elasticity, or Price Elasticity to be precise, is the concept that says if a product is faced with change in price there is a chance people will buy or more or less of that product, based on the movement of the price.
As the sales and discounts in real life shows that people are more willing to buy a product when the price of that particular product is faced with a change in its price, especially if that change is a negative one.
It is surprising how strongly economics is integrated in our lives. With all the tiny details, buying pattern, decision making, planning, and forecasting involving the principles of economics, it is surprisingly how close economy and our daily lives are.
Just like we look at all the present situations and predict the best outcome, and choose a way which leads to success, similarly economists, study patterns graphs and socio – economic situation to predict how good or bad a country is doing and what decisions should it take to make the sure that its economy stays strong and stable.