Economics as Seen In the Daily Life, Research Paper Example

Introduction

The different writer has given different definition of economics, but there is one thing in common, which is the law that affects the demand, price, and supply along with customers taste and preferences. It can said that though there are number of ways of explaining the economics, but the ultimate objective of economics is to look into and identify the cause and effect relationship between demand, supply, price and customers choice. Very often, economics is seen as a social science subject, where they relate it to the essential things required for leading a life. In reality, they add more value to the comfort of our life, not just dictating the things essential for life. Thus, economics may be considered as the cognitive and practical approach, and not a simple approach of making predictions like horoscopy or astrology. The economics takes into consideration various necessities of the life and how these necessities are fulfilled. In economics this phenomenon is explained through the laws demand and supply, relationship between income and demand and in terms of market competition.

Economy for personal life

The economy has a great impact on the personal life of the people.  Rise in the price of items, short fall of global economy, wars and treaties may be a thing of media coverage. It happened so until the recession that hit the world market in the midst of year 2006. This opened up a new era for economists to come into picture. Impact of the global recession has affected personal of various people all over the world, no concern of whether they are a business people or common people. For common people, economy affects daily life in one of the following ways:

• Fluctuation in the price of precious metals like gold and silver
• Hike in the price of petrol, diesel and other natural gases
• Increase in the cost of essential commodities

Hence in personal life, economy plays havoc in various aspects. Without prior knowledge about economy, various aspects of life such as savings, investment cannot be managed in a proper manner. The income of individual has direct impact on the purchasing power, which can be explained by the fact that with the fall in the income of the individual the buying capacity reduces, as the disposable income falls (Nechyba, 2010). In the fall in the income is too high then the consumer prefers inferior good and if the fall in the income is not too high the consumer switches to normal goods. With the rise in the income the consumer starts looking forward to buy superior goods.

International trading and economy

In terms of international trade, economy is the most important player. Every country has some particular set of resources. These resources may be categorized as: human resource, natural resources in which most important are oil and gas, and nuclear resource. Taking the example of gulf countries that have huge reserve of oil and gas and due to which they are prospering day by day. Before the advent of petroleum and oil reserves in gulf countries, they were amongst the poorest economies in the world. After the researchers found that they have plentiful reserves of oil resources in the form of fossil fuels, they exploited the resources more effectively and have now become an important country in the world in terms of economy. In order to fulfill the need for food and grains, the gulf countries import huge amount of food grains and other cereals. The gulf countries have healthy trade relationship with various developed economies of the world, to which they export their oil and import the food grains and cereals.

In the international market there is the situation of perfect competition, where there are large numbers of companies producing similar products (O’Connor, 2004). Due to this the customers have choices to choose from various substitute goods and service available. The perfect competition also leads to the situation of price competition where in the companies promote their products and services by lowering down their price or by providing discounts. The change in the price also affects the demand for the product in the market (Landsburg, 2010). In case of the perfect competition where there are large numbers of manufacturers, the rise in price of the A leads to the rise in the demand for the product B, wherein the products A and B are substitute goods. For example, in case of tea and coffee, if the price of coffee rises it will eventually lead to rise in the demand for tea as people will prefer drinking tea rather than coffee.

Politics and economy

The government has great impact on the economy of the nation; this is because of the fact that the policies formulated by the government are the underlining principle that governs the overall activities of the nation.  A poor policy can led to complete failure of the market as the fiscal and budget policy of the government affects the interest rate and the overall development if market. The export and import policies developed and implemented by the government, affect the flow of foreign currency into the economy thus affecting the rate of currency in the international market. Market failure generally occurs when the financial institution fails to provide loan to the corporate and are required to plough back the investments and also forces the corporate to pay back the loan amounts (Mamica, & Tridico, 2014). This happens due to the fiscal deficit also known as financial crisis. If the government pays more attention to the export of particular commodity in excess quantity, it may lead to shortage of such commodity in the domestic market thus leading to rise in the price of that particular commodity. While seeing in a macroscopic vision, it is required that all government authorities must have a proper understanding of economics. The government plays a significant role in the development of economy in the following ways:

• Determining the various possible ways for development
• Devising policies and trade agreements with foreign countries
• Formulating effective fiscal policies.
• Formulating effective trade and commerce policies.

Most developed countries in the world are countries with best economic plan. They have a sound knowledge about the way economy of the country is present in the current scenario and how well it can perform in future days. With this knowledge, they can take preventive steps to maintain economic level as it is.

Japan model of economy

No one in this world can forget the aftereffects of the world war that took place during 1900 to 1950. During the wars, the countries that was worst affected is Germany and Japan. But in the current world scenario, both these countries are one of the important economically powerful countries. Among these two countries, Japan is the most notable one. After frequent nuclear bombing on Japan by the American military forces, they were cut down into several pieces. They were worst affected due to poverty and lack of job. The economic situation of Japan is like a piece of shrunk paper. There is no support for them to resurrect their economy. But with their effective economic planning, they raised up from the past happenings within just 10 years after they have been left with nothing.

Role of government in safeguarding public interest

The government formulates and implements various policies to safeguard the interest people from economic fluctuations. This may be in the form of inflation or illegal business practices adopted by the business organizations to maximize their profit. The government imposes the price ceiling on the products, so that the retailers are not able to increase or fix the price for their self interest. Under the policy of price ceiling the government fixes the price of the commodities in order to make them affordable for all people. The price ceiling is generally applied to the necessary goods so that people can afford them even when there is inflation in the market.  Some products that are included in the category of necessary goods are- rice, wheat, salt, and other eatables that are essential for living. While deciding when to apply the price and to which products it should be applied the government is required to make in-depth analysis of affect of demand and supply on the price. There are times when there is rise in the price due to less supply and vice versa. At these times applying the price ceiling generally have adverse effect on the economy by leading to huge monetary loss to the producer.

Apart from safeguarding the interest of the people the government also has responsibility to ensure overall development of the economy, and the overall growth is achieved through keeping the interest of public and producer at the top priority. In order to ensure that the producer is not going into the loss or the goods or services are not sold on loss, the government applies price floor. There are instances when the seller does not lower down the price after reaching a lowest possible price. This is because of the fact that the product has a price floor, which means that the product will not be sold below that price. Under the price floor, the government generally fixes the price above the equilibrium price, so that in long term it doesn’t lead to monetary loss. The concept of the price floor can better be understood by the looking at the payment of wages. In every organization minimum wage act applicable, which states that there is a fixed minimum level for the payment of wage and no owner can pay wage less than the minimum limit specified.

Impact of Japanese goods on the market

The Japanese and Chinese goods can now be seen in almost all markets, whether it is of developing economy or developed economy. The Japan is well known for its cutting edge technology that cannot be compared to any other country. The Japan is using its absolute advantage to derive maximum quality productions. The country is well known for manufacturing world class cameras, Smartphone and tablets. The country is using its available technological know-how and the skilled workforce to get maximum production while ensuring the quality of the final product. The term absolute advantage signifies making best of use of available resources that the competitor fails to do. Due to the absolute advantage the country is able to product very high quality products with minimum wastage and also offers the goods produced at the competitive price. Taking the example of Samsung Smartphone that have number of features which no other Smartphone offers to the customers and that too at reasonable price.

Apart from the absolute advantage there are economies which rely upon the comparative advantage. This means that the economies are interdependent upon each other for the products. One country may have very good technology to produce certain type of good, while other may have good technology to produce different good. Each country sacrifices the production of that good for which the best technology is not available. Both the countries prefer import of such goods which they are not able to produce.

Online business and economy

World has now became a global village. After advent of various electronic items like smart phones and low cost computers, people are able to do many things with just their mobile phones. To an amazing extent, economy of several countries changed because of advent of internet. Even people who introduced internet were not aware of the potential it has to influence the economy. Online market is one of the powerful and most influential markets in the world where a person in one country can trade with a person in another country without any means of physical communication among each other in a written format. Online marketing has become one of the greatest possible ways to make a business to flourish well. On a meeting with the head of Panasonic, about their origin, he told an interesting fact that “We may be born in Japan, but we are here for the whole world”. This clearly focuses on how things are seen in the global market. Important facts that presume why international economy is much dependent on online is:

• Improvements in the global means of transportation
• Thirst of people on latest products
• Availability of internet to mass of people

Transportation has improved a lot in various means like ship, land and air. The cost of transportation has come down than expected levels, boosting cost reduction. Trend among people today is to have the latest products available in market. This also adds more importance to the global economy. Leading companies have now gone to online marketing. With this, they can cover up the entire globe quite easily. Thus online marketing plays an important role in international economy.

Class of family and economy

The features of national and international economies have direct impact on lives of common people. Apart from these things, there is also some class of people separated without any reason among themselves, influencing economy in many aspects. Before going to deep into the features of the class, the general classification of class according the point of view of economists is as follows:

• Low class
• Middle class
• High class

These classes are based on the income of the people. Based on the economics theory of income, the demand for the particular type of goods and services is more affected by the income of the people living in that particular area. The region where there is huge difference between the income of the people, the market of that particular is quite unstable as the demand for goods and services keeps on fluctuating. The people who lies under the low income group generally prefer those goods which neither falls in the category of inferior goods and nor in the category of luxury goods. The people falling under the category of high income group have the tendency of demanding high quality goods and luxury goods. Through this it can be said that fall in the income of people leads to increase in demand for normal goods and increase in income of people leads to increase in the demand for luxury goods. For example, the demand for luxury readymade flats and villas are more in the region where most of the people are from high income group.  Also they will send their children to some ordinary schools. Dressing and way of living substantiates that they are low class people. Middle class people are those with salary level that they can pay for some luxury in life. They may or may not have own house. Typically they have a bike, rarely some owns car, and this shows that people lying under middle income group have more demand for two wheelers rather than four wheelers.

Influence of class of people in economic policy making

Government policies are not devised just keeping into account of the available resources and the population of the country. The government frames the policy keeping in mind various factors such as, interest of common people, revenue generation for development projects, and the financial condition or the economic condition of the nation. As observed in general, low class people need more efforts to come up in life. It is the responsibility of government to aid people living a low class life to come up in life with higher standards of living. For this purpose, governments implement schemes like building homes, providing employment and providing finance for such people. It is their part to use them effectively for betterment of their life. Middle class people again can be classified as three classes:

• Lower-middle class
• Middle-middle class
• Upper-middle class

These classes actually not exist in the prospects of government. They are a sort of economic classifications among the middle class family to quantify their impact in the society. Aim of the middle class is to improve their life standards to match with that of the high class people. Government policies are generally directed only towards the lower middle class people, where they have just removed their tag of low class people. The rest two categories are not taken into consideration to a great extent. High class people are not at all included in the government policies. What applies to all citizens in the country will apply to them too. They will never be considered in government policies. Governments regard them as people who can take care of themselves without aid of government for their development. Since most of them are business people, they sometimes involve in economic policy making process.

Conclusion

Economics may have different meaning in different situation, but the major thing that it includes is the policy formation based on all those factors that are in some or other way related to financial terms. The government pays more attention to the economic policy formation as it affects the market as well as the buying pattern of the people. The economics is more of less related to all those activities of an individual and society which are directly or indirectly related to the attainment of materialistic things that are required to make the life good. Migrating from this point of view to the business point of view, economies also plays a significant role in regulating the market by clarifying the relationship between various market factors such as- price, income, demand and supply. The economics takes into consideration all micro and macro environments factors that affects the economy of any nation. It clearly indicates on how well an economy will perform in future, in terms of both profit and loss. Economy answers for the question of what will happen when certain variables are changed. Expecting a pin point result is not quite possible, but an estimate of things going to take place is possible by studying economics. It is a continuous process, rather than making decision on one time and just relying on them blindly. These features favor economics to be an important social tool for viewing development as a cumulative process.

References

O’Connor, D.E. (2004). The Basics of Economics. Greenwood Publishing Group.

Mamica, L., & Tridico, P. (2014). Economic Policy and the Financial Crisis. Routledge.

Nechyba, T. (2010). Microeconomics: An Intuitive Approach. Cengage Learning.

Landsburg, S. (2010). Price Theory and Applications. Cengage Learning.

Lindeman, J.B. (2002). Microeconomics. Barron’s Educational Series.

Demand and income. (n.d). Retrieved April 19, 2014, from     http://www.economicsonline.co.uk/Competitive_markets/Demand_and_income.html