This is an article I had written during my MBA at Great lakes Institute of Management, Chennai for a Microeconomics assignment. I was graded “C” – so be careful before using/ copying the material for your assignment.
Inefficiencies abound everywhere, yet the world goes on. Chaos, confusion, information asymmetry, scarcity, demand and supply side constraints rule the roost and it is only the discerning purists who are able to fruitfully utilize the value differentials to their best advantage. Competitive advantage is a function of these value differentials and it is only the leanest, meanest and most insightful value-seekers who survive and thrive in the chaotic interaction environment which people call market. Microeconomics provides a very broad conceptual framework to understand and appreciate the dynamics of everyday life occurrences in the context of the parameters alluded to above.
Contrary to popular economics lore, rational people hardly ever think at margin. For if they did, markets would have been subjected to perfect competition and the world would not have been such an exciting, inefficient and unpredictable place. Nobody would have heard of Buffet, Bill Gates or Soros. People respond to incentives. Incentives are, incentives have been and incentives shall continue to be what motivates people or firm to do what they do. Coupled with scarcity, natural or induced, information asymmetry, social, economic and political constraints, the effect of these parameters in entirety is an exercise that would be better off relegated to the realms of chaotic self-propelling non-linear dynamic systems. However human mind likes to project order and system to chaos and thus we have a simplistic conceptual framework of microeconomics based on a number of (questionable) assumptions of thinking at margin, perfect knowledge and commodity product. However, this framework is capable of answering many queries, of both simple and complicated nature.
Why do I prefer McDonald’s Big Mac
burger and not Burger King’s Whopper
? Microeconomics does not answer this question, but through its elegant demand and supply theory and theory of marginal utility would explain, why I would pay, what I would pay if Big Mac were to become unavailable for some reason. Opportunity cost is a common terminology associated with this subject. I left a high-paying job and very comfortable lifestyle in order to pursue MBA from Great Lakes Institute of Management
and be subjected to bad vegetarian food
at the Sodexo
run college canteen, antics of Rajhinikanth
emulators and MGR
look-alikes. My total course fee is therefore an aggregate of the actual course fee plus the salary and lifestyle expenses I have forsaken for my intellectual pursuits.
The effect of Microeconomics does not stop here – it is because of Microsoft’s monopoly in the operating system market that I use a poor quality operating system like Windows XP, it is because of information asymmetry that stock prices start moving up or down much before actual results are declared (on account of insider trading) and I lose money whereas other people make money, it is because of lack of perfect information that auctions at Sothbey are considered so prestigious. From waking up in the morning till going to bed, every action is dependent on some form of microeconomic parameter. The dynamic changes in the market forces have brought about a tectonic shift in degree of control microeconomics exercises on our daily lives.