Impact of Economics on Daily Living

Impact of Economics on Daily Living

Question 1

The family has had to adjust its budget because of the need to respond to the changes prompted by the increase in commodity prices. As indicated in the available data, the prices for most of the commodities that the family consumes have risen. The rise in prices might be attributed to a wide range of underlying economic factors like inflation rates and the increase in operations costs. Hence, to manage the situation, the family has had to revise its budget by minimizing its expenditure on the non-essentials like personal spending, transportation, and accommodation. Meanwhile, the family has been forced to retain or increase its expenditures on essential commodities, including food, health care, education, and food.

Question 2

The economic concept that is applicable in this case is a trade-off. The trade-off can be used in this context to refer to the decision of the family to review its budget by giving preferential treatment to certain items while forgoing others. The family has decided to increase its expenses s on the essential commodities because it cannot afford to live without them whatsoever. However, the family decided to minimize its expenditures on the non-essential commodities which it can live without. That has happened because the family is ready to compromise. The compromise is necessary because the income/revenue is limited.

Question 3

Supply and demand are, of course, key factors that determine how people make economic decisions. Supply and demand can dictate the way people make choices and budget because the costs of items are directly proportional to the changes in demand and supply. If supply increases, the demand decreases. However, the costs of products decrease, making it possible for clients to afford as many products as possible. However, if the supply decreases, the demand increases, hence increasing the costs of products and making it hard for people to afford all products they budget for unless their income also increases.

Question 4

Compound growth has had a direct influence on the changes in the budget of the family. Since compound growth contributes to a rise in the growth of an investment, it might translate into a rise in the cost of commodities that the family relies on each financial year. The rise in compound growth is directly proportional to the rise in living costs to the family.

Question 5

The advice I can give to this family is that it should adopt a flexible budgetary approach. It should be ready to adjust its budget from time to time. The review should be based on the changes in the economy. If the economic situation toughens, the budget should be reviewed by increasing the expenditure on the essentials while minimizing those of the non-essentials.

Question 6

I have faced similar tough situations just like this family.  I have had to deal with the problem of inflation that has led to an increase in the prices of commodities and the costs of living. As a result of this, I have had to adjust my budget by balancing it appropriately.

Question 7

If the situation persists for the next one year, I might find it quite challenging to survive. I will not be able to meet all my needs since the income will not sustain me. In this regard, the only alternative I will have is to review my budget by employing the trade-off strategy.

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