Question

***A question for anyone, EXCEPT the 'expert' MITHILESH (Mithilesh).***

What are five ways we practice microeconomics in our daily lives?(With Explanations) How would a COO of a financial firm use microeconomics in his/her career? (With Explanation)

Answer 1

Solution

There are many ways we use microeconomics in our daily lives.Some of the them are as follows:

1.Opportunity cost - We make the choices where the opportunity cost (i.e., the cost involved by opting for present decision instead of choosing an alternative decision) involved is the lowest.

2.Maximum Utility - Example,when we have to choose between purchasing 2 items,we choose the one which has the highest utility.

3.Diminishing Marginal Utiltiy - Example: Eve though we like a particular dish,we will consume only some limited amount because after we consume it above our threshold limit,we start loosing to feel the taste /enjoy the dish (i.e.,our satisfaction / utility we derive from consuming another additonal unit ) will decrease,so it will not make any sense for us to consume any more of it.

4.Supply - Example :When the supply of any good increases (say corainder) ,the price of it will come down,so we use more quantities of it in whatever dish we prepare.So,ultimately the demand will be seeing a rise.

5.Demand - Example:As the date of journey nears,the ticket prices of the planes increase in multiples specially in the peak demand season.So,regular consumers purchase the tickets at a much lower price months before the actual travel.

6.Pricing - Example : (Say)We have a choice to see movies by purchasing them online on per-movie /per watch basis (or) a unlimited membership per month from netflix.So,we choose the option which is priced comparitively lower according to our requirement (i.e., where our value for money is more)

A COO of a financial firm will :

1.Take the decision choose the project which would have the lowest opportunity cost.

2.Will opt for the decision which he believes would yield maximum utility for his firm,employees and other stakeholders.

3.Example:Will make a hiring decison based on the marginal utility of the employees.

4.Will take ordering decisions related to raw-materials accordingto the supply in the market.

5.Will expand his firm's presence (or) increase his firm's presence based on the demand forecasts from the market.

6.Will lead the pricing teams who work on negotiating prices with the suppliers and also with their clients/customers.

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