Economics of Daily Life
Economics is a study of how society manages its scarce resources. The literal translation for economy is “one who manages a household.” “In an increasingly complex world connected by social and economic interaction and interdependence, news of stock market fluctuations, consumer confidence scores, and various economic indicators fill the media” (Broome & Preston-Grimes, 2011). This means that economics is everywhere, even in a home. Every household makes decisions that follow the economic principles. There are tradeoffs, and incentives. Supply and demand regularly show up in a household setting, as do decisions regarding limits on price and time. I …show more content…
When the calendar works towards a holiday, the demand goes up. Take for example, Valentine’s Day, the demand of flowers, more specifically, roses, increase. Our supplier has only a certain amount of flowers available. Because the demand is high, the suppliers cannot keep up and our shops supply gets a bit scarce. The closer it gets to Valentine’s Day the higher the price of roses gets. Our shop sets a minimum for flower orders but then has to raise the minimum because our supplier has raised our price of roses.
When supply and demand is in play the consumer has choices to make. Each customer will have their willingness to pay or “the maximum amount that a buyer will pay for a good” (Mankiw, 2007). The result of their savings is consumer surplus, which is defined as the amount a buyer is willing to pay for a good, minus the amount the buyer actually pays for it (Mankiw, 2007). When ordering flowers, each customer has a price limit in mind for their arrangement. If the price of our flowers is above what the customer is willing to pay they will go somewhere else to find the flowers. Just like the customer, I as a single mom, have a limit that I can pay on things in my life. The biggest item that comes into play for consumer surplus is rent. Having had a price in mind for rent, I went looking for a place big enough for my children and I to live in. Let’s say I budgeted $1000, and looked at 3 different homes. One home was $1200, the