How Does Microeconomics Affect Me?
Microeconomics is the division of economics that looks at behaviors of individuals, firms, companies and industries. It is defined as the branch of economics concerned with how such individuals, households, firms and companies make their decisions in allocating the limited resources at their disposal. It focuses on how behaviors of these groups affect the price of goods and services within the market, and, in turn, how such prices affect supply and demand of the goods and services. Therefore, as an individual, microeconomics affects how I make decisions concerning the limited resources at my disposal.
The main effect microeconomics has on me as an individual is decision making. Within my household, I have to be concerned with microeconomics since it determines what I can do with the limited resources I have. My resources as an individual come from my earnings. When the price for a particular product is high, it means I have to spend more. This further means I have to forego another product or service in order to have more disposable income to spend. An example is when deciding to buy items in the market. Considering microeconomics sets the prices, I will be forced to buy what my income can afford. For instance, when I cannot afford to pay for education and buy a house at the same time, I can choose one, depending on the amount of money I have as well as the importance. The forgone product becomes the opportunity cost of the product bought. Therefore, microeconomics affects the amount as well as what goods I can buy in the market since it sets the prices and demand.
Microeconomics, especially government policies, affects my decisions in a significant way. When government sets tax at a certain level, it means my income will be affected. When the government increases the tax rate, my net income will reduce. On the other hand, if the tax rate is lowered, it means the amount of income I get will increase, thereby providing me with a bigger disposable income. Additionally, when the government sets the prices of public goods higher such as price of fuel depending on the market, my decisions concerning traveling will be affected since I have to consider what my earnings can afford. Thus, when government regulates some items within the market, I am affected directly since it determines what I can buy at what prices as well as amounts of it. Government regulations on individual markets affect my decisions concerning consumption.
Microeconomics sets the prices of goods within a market depending on the supply and demand. As an individual, I have the ability to influence the prices or affect the market although I cannot do it alone. On the other hand, the market has influence over my behavior in terms of determining how I behave. Considering microeconomics affect demand and supply of goods and services within the market, it determines what products are available as well as their prices. Therefore, microeconomics influences the goods that are provided in the market. When something is not highly demanded, manufacturers are forced to reduce its supply while they increase or produce more of the highly demanded products.
Additionally, microeconomics affects what an individual, a firm, or a company can produce to offer at the market. Depending on the demand, the company will produce goods as demanded. Goods that are out of demand are no longer produced. Therefore, the microeconomics determines the goods and services that are provided in the market as well as the amount. The same way a company produces goods that are on demand, it is the same way that microeconomics affects me in terms of deciding what I should provide such as labor services in demand to an income. When technicians are in demand, I will consider taking a technical course to become a technician or a nurse if nurses are on higher demand. When certain jobs are out of demand, I will seek other jobs that are on demand as well as decide on the amount of time to work to meet my needs, which are largely influenced by the market. Thus, microeconomics will affect the kind of labor that I want to offer, depending on that which is most profitable. For instance, phone operators are almost out of demand, meaning that such people have to seek other jobs that are on demand.
On the other hand, microeconomics differs with each region. Within some areas such as urban or city areas, price of goods such as house rent a well as other services could be higher than rural areas. Therefore, depending on my financial ability, I will choose where to live. Additionally, it determines whether I should consider changing my job in order to earn more. When it comes to places of living, I might consider working in a rural area where the salary might be lower. This will depend on the cost of living between the rural and urban areas. Within urban areas, the cost of living could be higher than the rural areas with a sizeable margin such that the higher salary might not meet the demands. Within rural areas, a lower salary could meet all the demands and still leave a higher disposable income. Thus, microeconomics in this case will affect where I choose to work and live depending on the cost of living.
Further, microeconomics will determine my ability to save money for other purposes in the future. When the cost of living is high or prices are set at a higher level in the market, it means I can save very little or nothing depending on my income. This will affect my purpose for holding money. With a high cost level, my money will mostly go towards a transactionary motive to meet daily demands, and this will reduce the disposable income. On the other hand, lower prices will increase my disposable income and allow me to use money for other purposes such as the speculating and precautionary motives.
In conclusion, it is clear that microeconomics affects my behavior and response to the market. Considering that it is concerned with how prices change within the market as well as the factors contributing to these changes such as demand and supply, microeconomics will affect my decisions concerning consumption. Any time I go to the market, microeconomics will influence what I can buy as well as what I can offer the market in terms of labor.