Question

Write a paragraph with three to four sentences explaining the microeconomic effects and the potential impact on you as a consumer.

Answer 1

We will discuss about the microeconomics first and then see how it has an effect and impact on us as consumers.

Microeconomics : It is that branch of economics which deals with the study of individual decisions. That individual could be a person or a firm. It has fundamental principles that help in making judgements regarding how an individual will behave in a certain situation. The principles include law of demand and supply, opportunity cost, utility maximization, law of diminishing marginal utility, etc. It helps in analyzing the behavior of individuals and firms in order to make a decision in the market.

Microeconomics impacts and potential impacts :

1. Demand and supply : First of all we know that we study about a rational consumer in a microeconomics. So demand and supply are two major factors of it. Market supply means the goods and services available to the consumers and market demand means the goods and services demanded by consumers in a specified time period. So in our lives we have seen that when there is a shortage of demand in the market, prices for the goods go up and vice versa. So demand and supply factor of microeconomic has impact on us making a choice.

2. Opportunity cost : The cost of forgoing the next best alternative is known as opportunity cost. When we lose other altenatives after choosing one then that loss is the opportunity cost. For example, if I gives up going to see a movie in order to prepare for my test so that i could get good grades, then the opportunity cost is the enjoyment of seeing that movie. So it is another microeconomical factor that impact us as consumers.

3. Diminishing Marginal Utility : It is another aspect of microeconomics which has potential impact on consumer's lives. It states that the more you consume, the lesser utility you get. For instance, if you eat one pizza you may feel satisfied but when you eat another pizza you get lesser satisfaction and we could see this impact in our lives while we make any purchase decisions. We try to figure out best mix so that we could get maximum satisfaction from each chosen product.

So there are various ways in which microeconomics has effects and potentially impacted our decisions and choices as consumers.