Introduction

In most cases, the assumption is that economics is a concern of top government personnel and key people in the financial sector. However, every single person unknowingly incorporates aspects of economics in everyday situations. Some of the most critical decisions in people’s daily lives are made using economic reasoning. Before deciding on a particular choice, one has to weigh the pros and the cons, and if one of the options seems to be more favorable, a decision is made. Economic decisions are made to maximize the benefits and reduce the value. An important note to make is that resources are always scarce in terms of money, time, and skills. People make economic decisions to maximize returns, for example, a student allocating a substantial amount of money in education to get a degree because he knows the degree will enable him to get a well-paying job, which will rake in a salary every month for the rest of his life.

Change in Technology

Change in technology is an economic concept whose application can be seen in a real-life event, with an example being a case of Netflix. Netflix is a leading entertainment company that uses the internet to offer its services to its customers. The company has over 158 million paid memberships in over 190 countries. In the past, the primary source of entertainment was physical DVD movies that were sold by merchants spread across town and videos aired in movie theatres. Back then, movie DVDs were not cheap either, and people had the option of buying or renting. With the advancement of technology and the internet, companies like Netflix offering a wide variety of movies to choose from, in the comfort of homes, and with an annual subscription so cheap came up such that people slowly started shifting from the movie DVD stores. Technology advancement has since led to the rise of new business ideas and the downfall of others (Amanda, 2017). Business needs to ensure that they keep up with such advancements to remain relevant in their markets.

Government Interventions

Governments can sometimes determine outcomes in business. This can be made possible by governments setting up directives that are to be followed hence disrupting the normal operations of a market. For example, in the recent Covid-19 pandemic, a number of governments have set directives for citizens to wear masks in public areas and for businesses to provide hand sanitizers to their staff as well as their customers. This has led to positive growth for companies dealing with manufacture and supply of hand sanitizers and a wide range of other detergents in terms of sales and revenue. The case is the same for companies dealing with the manufacture of face masks. The demand for these items has been increasing steadily as the governments are emphasizing more on their usage.

Trade-off

The trade-off theory is an economic theory that explains consumer behavior and consumer decisions. A tradeoff is a situation where one has to give up something in order to get something else. An example is in the current COVID 19 situation. Lockdowns have been enforced in different parts of the world. There is widespread uncertainty of the future, with consumers not aware of how long the lockdowns will last hence spending less so as to save on money, food, and other necessities. Because of this situation, consumers have to forego some items to reduce expenses on luxurious goods and invest more in food items and toiletries. One is more likely to spend money on food and groceries as opposed to buying a brand-new mobile phone or laptop, as explained by the trade-off theory (Greenlaw, Shapiro, Taylor & OpenStax College, 2018). This pandemic has seen people focus on buying things that they need for survival as opposed to luxury and entertainment.

Absolute Advantage

Absolute advantage is the ability of a business to produce goods and services for much better than any of its competitors (Greenlaw, Shapiro, Taylor, 2018). Internet and technology company, Google is an example of a business enjoying the absolute advantage. Over the years, Google has emerged as the world leader in its trade. The company has gained popularity over its competitors, that it has become almost impossible for any of them to catch up. Their competitors in the industry include Yahoo, Apple, Amazon, and Microsoft. Google, through its different marketing and operating strategies, has managed to remain relevant in the market and even increase its customer base across the world.

Profit maximization in a competitive firm

The main objective of any business is to maximize its shareholder’s wealth. In a competitive and open market, business managers employ different operating and marketing strategies to maximize profits. Policies used vary from company to company and from industry to industry. The idea is usually to remain competitive in the market while still making reasonable profits. One such strategy employed by firms in a competitive market is to reduce operating costs through the acquisition of affordable raw materials, budgeting, and innovation Ibrahim, M. J. (2017). Albi, as a brand selling groceries, has adopted a strategy of no refrigeration for its groceries to reduce storage and electricity costs. The shop uses cartons to store its fresh groceries. The other method is that the shop does not use packaging or wrapping bags for its customers but instead allows them to go home with carts and bring them back in exchange for their change. Unlike other brands, Albi, the brand does not brand its products hence allowing them to attract customers through quality products that are cheaper than others in the market. By so doing, the business attracts customers, therefore, selling more items for less than their competitors (Zenger, 2016). Such measures not only allow the company to conserve the environment, offer quality products to its customers, but also will enable them to reduce costs hence making more in revenue.

References

Amanda. (2017). HOW TECHNOLOGY CHANGED THE AUTO INDUSTRY.

Retrieved from Eagle Ridge: https://www.eagleridgegm.com/technology-changed-autoindustry/

Greenlaw, S. A., Shapiro, D., Taylor, T., & OpenStax College. (2018). Principles of economics

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Greenlaw, S. A., Shapiro, D., Taylor, T. (2018). PRINCIPLES OF ECONOMICS. 12^th Media

Services.

Ibrahim, M. J. (2017). Emerging issues in economics and development.

Zenger, T. R. (2016). Beyond competitive advantage: How to solve the puzzle of sustaining

growth while creating value.

Application of Economic Concepts

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