Application Of Economic Concepts In Our Daily Lives
As a practical person, not really a researcher or scholar, I take interest in the application of the knowledge I have learned for a subject, be it science, mathematics or economics.
It is not hard for people to see the link in terms of science, as the everyday objects like cookers, fans and telephones are all examples of how science can be applied in our daily lives. It is not that hard to see the link in terms of mathematics either as we pay for our food, drinks and other purchases which involve simple calculation as part of mathematics. However, many fail to relate economic concepts they have learned in economics tuition to their daily lives. I hope this article will lead you to discover a wonderful world of economic concepts, which can be used to help you solve various real-life problems.
Scenario 1: Your Daily Bargain With Various Parties
All of us have come across such circumstances where we need to bargain with vendors for a better price. What do you need to know in order to gain an upper hand in your daily bargain with them?
- Market Price for Similar Products
It is important to compare the prices of similar products. The correct economic term is substitutes as you have been taught by your economics tutor in economics tuition. A comparison of prices of substitutes will help you gain an initial understanding of the pricing of the product. For example, if the whole meal bread of brand A is priced at $2.50, you may consider the similar product of brand B which is priced at $3.20 as a bit over-priced.
- Profit Margins
Students have learned in economics tuition that price elasticity of demand depends on the number of substitutes and closeness of substitutes. The higher the number of substitutes, the greater the price elasticity of demand and the lower the firms’ ability to increase their profit margin by increasing the price. Similarly, the closer the substitutes, the greater the price elasticity of demand and the lower the firms’ ability to increase their profit margin by increasing the price. Therefore, by a quick research of total number of substitutes and closeness of substitutes available in the market, we can gain an understanding of the possible profit margins.
- How Much Bargaining Power You Have
This is not something your economics tutor could have taught you during economics tuition. In order to assess your bargaining power, you need to have a good understanding of how important this deal is to them. If your business will account for more than 10 per cent of their annual turnover, I am certain they are willing to make compromises to close the deal.
- Does the Benefits Justify for the Cost
Students have learned about cost benefit analysis not only in accounting, but also economics tuition. In economics tuition, ‘utility’ which means satisfaction is used by economics tutor in place of benefit. The cost, in this case, is the price of the product. It is only worthwhile for a consumer to purchase a product if the utility generated from consuming the product is higher than the price.
Scenario 2: Anticipate Your Opponent’s Next Move
Students have learned in economics tuition about the prisoners’ dilemma. This is a very useful concept which can be applied in your day to day dealing with your opponent and work to your advantage in your wrestling with them. The gist of this is to identify your best move in anticipation of different moves by your opponent.
If you are interested, you can learn more about this topic from your economics tutor in economics tuition.
Linda Geng
Economics Tuition Singapore @ Economics Cafe
Principal Economics Tutor: Mr. Edmund Quek