LIFE FULL OF ECONOMICS

As we look into our daily life, we can see that, behind each and every spending and consuming behaviour of us, there is a concept of economics in it. How we take decisions to buy, how we spend, how much we spend, what benefits we get from that spending and are we satisfied from that spending? The changes in prices, in consumptions, in expenditures etc., all are related to one or the other concept or principle of economics. Let’s see some examples and which concepts of economics are involved it them:

1)PEOPLE FACE TRADE OFF:

For example, once my mother and I went to a buy a saree for my mother. That day, we actually spent 3 hours in the market just to buy a saree. We searched sarees in 5-6 shops. Then we finally got a saree of our choice. In this situation, we can see the very first principle of economics that is “People face trade-off”.

Trade-off means a decision that a customer take of buying one product and sacrificing other after comparing two or more goods that they want. In our situation, we have faced exactly the same confusion. All those saree shops were showing us the best quality saree with variety of colours and fabric from their collection. That was making us more confused. We were facing so much difficulties to come to a decision of choosing one saree among them. Few sarees were very good but were out of our budget. Then after searching in 5 to 6 shops we finally selected a saree under our budget after trading off of between so many sarees.

2)SUPPLY:

For example, we often get to hear about the news of live dance shows done by Bollywood celebrities. When the dates of these shows are out, the excitement level of people increases and ticket prices increases. Even at a high price, people are ready to buy the ticket. And the show organisers gain more and more profit. Then organisers are more willing to organise these dance performances to earn more and more profit.

Here in this case, we can see the concept of supply and its relation with price. Supply is the willingness and ability of the producer to offer to sale in the market. And supply and price has a direct relationship. When price increases, the quantity supplied also increases, and when price decreases, the quantity demanded also decreases. And in this case, as the price of dance shows ticket were increasing, the organisers were more willing to organise the shows.

3)INCREASING RETURNS TO SCALE:

For example, if a company increases the usage of skilled labour along with the technology, it is expected that there will be an increase in output in service industries.

Here, we can see the concept of increasing returns to scale. The increasing returns to scale concept says that output increases more than proportionately with the increases in the inputs. And in this case, skilled labours and technology are the inputs in production. And with the increases in their usage, the output is expected to be high.

4)COST BENEFIT ANALYSIS:

For example, if we want to open a mall. And there are 3 prospective locations namely A, B and C. Each location is offering us different net benefits. The net benefit units offered by location A, B, and C are 1000 net benefit units, 800 net benefit units and 850 net benefit units respectively. And now we have to the choose the location which gives us the highest net benefit.

Here we can see the concept of cost benefit analysis. For choosing the best location for our mall, we have to do the cost benefit analysis. As we can see, location A is giving us the maximum net benefit units of 1000, 150 more net benefit units from location C and 200 more net benefit units from location B.
So we will choose location A for the prospective location for our mall.

5)PEOPLE RESPOND TO INCENTIVES:

For example, Flipkart offers Flipkart fashion sale every year. In the sale, people get to receive thousands of variety of clothes and accessories with unbelievable discounts of 70%, 80% and even 90% on big brands. In this, we can see the economics principle of “People respond to incentives”.

By offering huge discount, Flipkart gives us incentives. And people positively respond to these incentives. And these sale becomes a huge success for Flipkart. People spend so much time shopping in these sale. These choose among the best and cheap product of good brands and gets the products in unbelievable prices.