Economics Everywhere In Everything

Economics Everywhere in Everything

When making an everyday decision, one fails to consider the economic concepts associated with any given choice. To exemplify how economic theories are incorporated into everyday life, we examine a typical Friday night outing with some friends. After eating dinner at a local Red Robin, and sipping Strawberry Margaritas at the bar, a group of friends decide they would like to check out the new club in Denver. None of the group members consider the many economic concepts which will surrounds their decisions throughout the night, but what exactly occurs economically on any typical night, much like this one?

Initially, the choice to go to the bar creates an opportunity cost. The opportunity cost is essentially the next best relinquished alternative. By making a choice to go to the bar, one may give up watching “Titanic” with the girlfriend, relaxing at home, or studying for an upcoming Economics 200 GR. However, it is Friday night and most will endeavor maximum benefitвЂ"the pleasure attained from having a good time at the bar in company of good friends. Similarly, applying the same maximization principle, the group decides to venture to the club in Denver. Furthermore, as the group decides which new club they will enjoy, the group unknowingly evaluates the market: an arrangement which brings buyers and sellers together, enabling both parties to gather information and do business with each other. When choosing the club, the primary market exists as the nightclub itself, however, a “social market” also existsвЂ"the club goers who interact with one another.

Each of the two markets (the club and social interaction at the club) is similar, characteristically, to one of the following types of markets: perfectly competitive market, monopoly, monopolistic competition, or oligopoly. The group of friends lives in a city with multiple clubs, therefore, the club market mirrors monopolistic competitionвЂ"a market where a many clubs compete to offer similar products (each club varying by music genre, lighting, or architectural structure) to the many club enthusiasts. The clubs also vary the entrance fee at the door, the availability of drinks at their bar, in addition to many other small differences; however, each and every club serves the primary purpose of providing the club participant a great night with great music. Moreover, some factors which strengthen the monopolistic-type completion are barriers to entry, such as obtaining enough money to rent a building on a popular nightlife street corner, or obtaining a liquor license.

Once the group of friends arrives at the club, they sit at the bar, evaluating the potential “honeys” in sight. They have already paid an entry fee at the door, which simultaneously serves as an opportunity cost, since the $20 cover charge could have been spent on next week’s dinner or some new pairs of long needed underwear. Earlier in the night, the group also incurred sunk costs: a previously incurred and irreversible cost such as the dinner bill at Red Robin, and the gas used driving to Denver to find the club. Since the group has already paid the cover fee, and the sunk costs of dinner and gas, it is now beneficial to stay at the club, socialize, and enjoy a few drinks. Additionally, once the group orders a round of drinks, they become buyers in the market, buying one of the festivities the club has to offer, alcohol.

As the group continues to enjoy the beverages, ordering another round of drinks, they delve into, yet, another economic concept: Supply and Demand. The club is filled with who are adults over 21, and legally allowed to drink. Since the bar is crowded with club goers, one makes the assumption that people at the club want to buy more drinks. In order for the club customers to demand drinks, they must be willing (and able) to buy the drinks during a specific period at a specified price. If a Corona costs $3 a bottle, and the group of friends decides to buy ten bottles over the course of the night, the ten bottles is the quantity demanded. However, if one of the group members meets a female and wishes to buy her a separate drink, the quantity demanded may shift. Factors which cause the demand curve to shift are: prices of related goods, income, expectations, number of buyers, and preferences. After spending $3 a bottle on Coronas throughout the night, the arrival of the $1.00 Dos Equis midnight special may shift the demand curve for Corona to the left. Moreover, how important the customer considers drinking is relayed as the price elasticity of demand. If consuming alcohol is considered a necessity by the group, alcohol becomes an inelastic good, and a change in price will minimally affect the quantity demanded. If alcohol consumption is a luxury for the group, then alcohol becomes an elastic good, and small changes in the price of a given beverage will modify the demand quantity. Furthermore, equally significant to demand analysis within the market is the concept of supply. The amount of a service, particular good, or resource a club is willing to sell during the specified period at the specified price is the quantity supplied. The club sells (supplied) drinks, the service from waiters and waitresses,