Good Example Of Essay On Apply Microeconomics Concept To Your Own Life

There are numerous examples where microeconomics is applicable to us in our everyday life. This paper will focus on some of the examples I encountered while I was a teen ager and also how these concepts have helped me to analyze every situation from an economist perspective.
Starting off with a simple example, as teenager I always loved McDonalds and would spend a lot of money buying shakes, burgers from an outlet. At that time I had no idea about the concept of utility which is a fundamental concept in microeconomics. Every time I consumed a burger I really enjoyed it and wanted to have a second one after it. Even after the second one I was not satisfied and wanted to have a third one in the same day. Then once my satisfaction threshold was reached I stopped. When I read microeconomics I read about the concept of utility and more is preferred to less in the case the product is good. I also came across the concept of diminishing marginal utility. When I had the first burger the marginal utility from consuming the second one was greater than the first one so I consumed the second one. Similarly the marginal utility from consuming the third burger was greater than the marginal utility of consuming the second one hence I consumed it. But after the third burger my appetite was full and I no longer wanted to have the fourth burger. This meant that the point of diminishing marginal utility had been reached and any more consumption of a burger would make me feel less satisfied. At that time I would not have thought that microeconomics could help me understand this topic from a very different concept that is utility.
The second example that I would like to share is that I used to travel by bus to school. Sometimes my parents would drop me off by car but mostly I went to school by bus. At that time I had no idea about the concept of a normal good and an inferior good. But now I can relate to that bus ride to school and think of it why it is an inferior good. The concept of microeconomics is that as income falls you consume more of the inferior good and vice versa. So when the financial conditions at home were not great I travelled to school by bus and when they were good then I could afford to travel in a car. A simple concept which was explained in greater detail by microeconomics and this has broadened my perspective. Even today as a young adult I find this concept occurring again and again. A lot of the people who work live far away from their respective offices and cannot afford to drive a car to the city, hence they take a bus which again reinforces the concept that bus ride is an inferior good.
The third example that I would like to share is that as a young child I would frequently accompany my mother to fresh fruit markets to buy fruits and vegetables. I could see lots of vendors selling their fresh produce. I noticed that they were selling the same vegetables, the same fruit with a very little difference in prices. Yes there could be a difference in quality of the fruit or vegetables but most of the time the difference in prices was very little and in the end they were selling the same apples, bananas, strawberries etc. I did not ever notice the fact that one vendor was selling lets say strawberries at 5 dollar a box and the other 10 dollar a box. Then when I learnt about perfect competition in microeconomics it started to make more sense. The concept of perfect competition is that there are numerous sellers in the market selling a homogenous product with a very little control over the price of the product. Now when I think about the fresh fruit market I think of it as a perfectly competitive market.
The fourth example that I would like to share is that when I went out with friends to eat and hangout I noticed that we always went to a particular joint to eat. This was despite the fact that there were three to four restaurants in the same street offering a similar menu but this particular restaurant had the maximum number of customers. I often wondered why? Then I got the answers when I studied microeconomics. I read about monopolistic competition and found out that each restaurant was trying to differentiate its products from the other. This product differentiation might be due to superior customer service or the unique ingredients used or maybe the chefs were superb. No matter what but this restaurant was able to differentiate itself from the other restaurants and able to earn an above normal profit and this is how firms in a monopolistic competition behave.
The fifth example that I would like to share is related to a monopoly. I used to travel by train a lot when I was a young adult and I often wondered why the tickets for pensioners were cheaper than for the normal passengers. I also wondered my why ticket as a school kid was cheaper than that of a normal passenger. Also what were off peak and on peak timings? Years later when I studied microeconomics I got my answers. The difference in fares was due to price discrimination where by the monopolist tries to discriminate between different consumer groups depending on their elasticties of demand to extract the maximum consumer surplus out of the consumers. The old people and the school kids have an elastic demand with respect to price and hence they cannot afford to pay a higher price for a ticket hence they were charged a lower price. The others have an inelastic demand with respect to price of the ticket and hence they were willing to pay a higher price. Similarly by separating the off peak an on peak timings the train company was practicing second degree price discrimination trying to ensure a maximum profit by separating customers based on what time they use the trains. All this made more sense once I had read microeconomics.
The sixth example I would like to share is related to elasticity of demand. I had an uncle who was a regular smoker. He used to smoke a lot despite the fact that cigarettes were expensive and noticed this trend amongst other smokers too. They kept on smoking more despite the rising prices of cigarettes. Then when I read microeconomics I found out about the concept of elasticity. Price and demand are inversely related which makes sense. The important thing I learnt was that cigarettes had an inelastic demand which meant that as the price of the cigarettes went up the demand did not fall as much. No wonder the smokers were not bothered with a price increase and microeconomics helped me understand the concept much better.