How Does Economics Affect Our Daily Lives?

Some of the principles of economics that affect our daily lives are the law of diminishing returns, sunk cost and opportunity cost. Marketing and budgeting are two common ways people use economics every day.

The law of diminishing returns is a fancy name for something bringing less satisfaction the more it is used or consumed. An example from every day life is eating chocolate cake. While the first piece may satisfy completely, by the fifth piece one may feel sick and the satisfaction rating will decrease.

When costs are already incurred and cannot be changed, those are sunk costs. In everyday life, some examples are a gym membership or car purchase.

Opportunity cost is something a person needs to give up to attain what he wants. This is quite common in daily life and does not always pertain to money. For example, deciding whether to stay at an old job or find a new one or choosing to study or go to a party are both opportunity cost situations.

Marketing is seen practically everywhere, from online ads to billboards. Every day consumers are bombarded with marketing from various businesses in an attempt to garner more sales. Budgeting is something most people do, whether formally or informally. Some may have a detailed annual family budget while a student may simply budget for spring break.