INVESTIGATING MICROECONOMIC CONCEPTS IN EVERYDAY ACTIVITIES
Early in the morning, the alarm beeped loudly at precisely 6 o’clock. After being awakened by the annoying noise, I got up. Right after freshening up, I began preparing for college. With great zeal and enthusiasm, I embarked on a new day filled with exciting opportunities and decisions awaiting to be made. My mind went over a striking thought while I was going to college. I realised that so many microeconomic concepts are intertwined with our daily lives.
I headed towards the campus canteen while pondering upon breakfast options, I felt the relevance of my first microeconomic concept. The scrumptious spread of lavish breakfast including croissants, French toast, sausages and freshly brewed filter coffee tempted me, but mindful of my budget, I went for a simple sunny-side-up egg with toasted slices of bread — a trade-off between desire and financial limitations.
While having my breakfast, I observed a scenario, Pizza costs Rs.20 per slice at the college cafeteria. At first, 50 pupils are eager to purchase a piece during lunch. At that price, the amount of 50 slices was demanded. Let’s imagine the cafeteria makes the decision to run a special deal where a slice of pizza costs only Rs. 10. The demand for pizza rises as a result of the cheaper price attracting more students who can afford it. This shift in demand demonstrates how the decreased price entices more students to buy pizza slices.
However, some students who consider purchasing the pizza at Rs. 2 may decide that the additional price isn’t worth it if the cafeteria boosts the price of a piece of pizza to Rs.50 due to rising ingredient prices. This can cause the quantity demanded to decline. This decline suggests that fewer students are prepared to pay the higher price for the pizza.
The concept of quantity demanded is demonstrated in this case study by the variations in the number of students willing to buy pizza slices based on the price. Changes in pricing affect students’ choices much like they do in economic markets, and elements including affordability, taste preferences, and alternative options all play a role.
After having breakfast, I went to the library to borrow a book. The concept of scarcity came into the picture when two other students claimed to borrow the same book, I wanted to lend from the library. Only one copy of the book was available at that moment. However, the librarian assured me to arrange another copy for me within 30 minutes. But I had to rush towards my classes as I was getting late. My choice to attend classes is the opportunity cost of issuing a book from the library.
During my economics lecture, the professor discussed demand and supply. Little did I know, I would encounter the same concept, heading out of college, at a local grocery shop. The price and availability of commodities are decided by the demand (what consumers want) and supply (how much is available). At the store, I found myself comparing brands and prices. The concept of rational thinking guided my conscience. I put extra thought into buying only those items worth the money I was paying.
I along with some of my friends thought of organizing a bake sale to raise funds for our committee event. We decided to sell home-baked cookies at a price of Rs.30 per cookie. Initially, we estimated that we could collectively bake and supply 200 cookies for the sale. At Rs.30 per cookie, the students were willing to buy and we were able to supply 200 cookies to the bake sale. This quantity supplied is determined by our baking capacity and the resources available to us. However, as word spreads about the bake sale and the cookies receive positive feedback, more students and teachers express interest in buying the cookies.
As the demand for the cookies increased, we realized we might need to bake and supply more cookies to meet this demand. We decided to raise our baking efforts in response to the increasing demand and pledge to provide 300 cookies for the bake sale. This rise in the amount supplied demonstrates how we are supplying more of our product to meet the increased demand.
After some time, we ran into problems like lack of ingredients, lack of time, and other obligations, so we had to reduce the quantity provided. Hence, despite high demand, we could only be able to provide 150 cookies.
We decided to supply a specific number of cookies for the bake sale based on variables including our capability for baking, the availability of resources, and the level of demand they encounter. This episode illustrates the idea of quantity supplied. We were able to efficiently manage our resources and maximize our fundraising because of the harmony between the price per cookie and the amount provided.
While returning from college, As I walked across a park, I witnessed a prime example of the concept of externalities. A man was playing loud music, disturbing the peaceful surroundings. The enjoyment he drew from the music was achieved by hampering others’ peace. This situation demonstrated the concept of negative externalities and how certain individual actions can affect others.
Subsequently, I moved on to a stationary store to buy a calculator. I found out that the prices of calculators are too high in that shop. If the stationary stores sell calculators at such high prices, students like me might opt for alternatives like sharing calculators, buying second hands or relying on digital versions. This would result in an increase in the number of unsold calculators. In contrast, if the stationary store sells the calculator at very low prices, they might get sold out in no time, resulting in a shortage. However, if the store finds the right balance in setting the price that students are ready to pay and the seller also covers the costs — a state of equilibrium is attained.
After reaching the hostel, I had limited time in hand, I had to balance between studying for the upcoming exam and working for a part-time job. I found myself in a dilemma. If I spend all my time studying, I might excel in the exam but will miss out on earning money and gaining experience. If I dedicate all my time to work, I might make good money but my performance in the exam will be compromised. As I shift my focus from studying to working, the opportunity cost changes. And if I put more hours into studying, I will have to give up on my working hours. The time I allocate for each task involves trade-offs and opportunity costs. My options can be easily plotted on a simple production possibilities frontier ( PPF).
Time spent working
Time spent studying
point B denotes that I spent most of my time studying and very little time working.
point C denotes that I spent more time working and less time studying. And point C denotes combinations of studying and working time that I can choose.
After finishing my study and work, I started craving ice cream. While relishing the delicious ice cream I explored the concept of diminishing marginal utility. With each spoonful of ice cream, the initial satisfaction started diminishing, reminding me of how our desire for a particular good or service decreases as we consume it more.
Before going to bed I video-called a friend and we discussed the topic of elasticity. Elasticity is “a measure of a variable’s sensitivity to a change in another variable, commonly called demand affected by other factors.” My friend shared a really informative example of the concept. For instance, if the cost of an SUV car increases exponentially, the demand for the same will decrease drastically because buyers are more sensitive to price changes for luxury items. Whereas, if the price of staple food like bread rises, the demand will not decrease as much because it is a necessity for people to buy bread on a daily basis. This elaborates on the concept of elasticity of demand, wherein the responsiveness of quantity demanded to a change in price changes based on the type of product.
As the day came to an end, I wondered how the microeconomic concepts I studied were not just theoretical or bookish ideas but actually the practical tools that shaped my daily choices and interactions. Microeconomics essentially provides the analytical framework for comprehending the underlying principles governing economic interactions and operations at the person and firm level. In doing so, it aids in the creation of policies, the direction of market behaviour, and the knowledge of how actual economies operate. From scarcity, opportunity cost, trade-offs, and rational thinking to the concepts of marginal utility, elasticity and externalities my whole day was a living embodiment of these important aspects of microeconomics. Through this eventful journey, I discovered that the subject of economics is not just about numbers and graphs rather it is about realising the intricacy of decisions and consequences that we engage in with each passing day.