Linking of economics to our day to day activities

Economics can be observed behind every aspect we do on day to day basis. Let’s see some cases that can be analysed.

People respond to incentives:

Incentives can be defined as any thing that influences the productivity or decision making of an individual. Let’s see where we can find it people prefer to  spend their money on pizzas in pizza hut on Wednesday because they respond to the incentive which is one plus one offer on that particular day. Like these there are many incentives that take a key role in decision making process.

Income effect:

If the income of a person increases the demand for a product increases if it is a normal good if it’s a inferior good the demand decreases. Let’s see if I want to go to some place within the city I prefer to use bus but if my income increases I use auto or cabs. Here as my income increases my demand for buses decreases.

Law of demand:

It states that if the price of a good decreases the demand for that good increases and if the price rises the quantity demanded decreases. Now let’s see I buy more biscuits in dmart because as the price of biscuits decreased by around 8 rupees than the normal.

Law of diminishing marginal utility:

It states that the marginal utility derived from each additional unit consumed decreases for each additional unit over a specific period of time. Now see how restaurants make profit from this generally they provide unlimited buffet for a particular price because they know that after a point of time the consumer can’t eat any more because he is already full if he eats more he needs to go to hospital.

Rational people think at margin:

Opportunity cost of a good can be defined as what you give up to get that product. As rational people always think at margin they do this cost benefit analysis which includes opportunity cost to decide which product to choose. While going out for dinner during Saturday night we go to that restaurant that gives additional discount over the bill although there are other providers with the same taste and same quality and same price.