Economics is a social science that mainly focuses on different fields of knowledge dealing with the proper distribution, allotment, production and consumption of resources. Economics has been divided into two significant branches; one of it being the microeconomics and the other one being the macroeconomics. Microeconomics can be easily understood through the term micro itself which means small, microeconomics focuses on small level that is to say it includes areas of individual decision making and its core components include production, exchange, distribution and consumption. Macroeconomics on the other hand focuses on a much aggregate level. Unlike microeconomics it influences those areas in its study that mainly focus on the economy as a whole rather than individual analysis. Once we are clear on the definition of both of the branches of economics we can therefore clearly understand their importance in our daily lives. When talking about microeconomics there are a number of examples that can be presented to highlight its importance in everyday life, some of them are:
a) The concept of utility is a base concept of microeconomics. The way we consume items, products or eatables in our daily live is all related to utility. For instance when we consume junk food it gives utility to us, when we listen to music on our iPods it provides utility to us or even when we read from a book we are getting utility out of that book. Utility basically satisfies our wants. In the examples above our want for hunger, entertainment and knowledge are all being satisfied.
b) Diminishing Marginal utility is another core theory of microeconomics. Its key concept is that how do we get additional benefits or utility from a product that even at a minimum cost. Its most practical example can be that of entrepreneurs and businessmen who try to maximize their profits at the minimum costs or marketers who try to cover the most of their costs of marketing through one single element of pricing.
c) The most practically implemented theory in microeconomics is that of Demand. In our daily lives we tend to demand a product more if it is affordable at the minimum price that is the main conceptualization of the law of demand. The concept can be understood through the example of cellular networks. Whenever a Cellular connection company decreases its prices and provides more benefits in fewer prices, than its demand automatically rises amongst the customers as compared to other networks.
d) The law of diminishing returns also finds its application in our daily lives. The law states that during a production process the marginality of a product tends to increase if certain variable factors that are involved in its manufacturing are added each time. For example in an industry if there is a large machine being used in the production process than by employing more than one labor to work on it will increase the marginal products produced out of it.
The above mentioned examples told us a great deal that how microeconomics finds its application in our daily lives. Now we will talk about how macroeconomics establishes itself as an important essential in understanding some of the mechanism of different transactions and workings in our daily lives.