REFUELING VEHICLE OR BUYING YOUR FAVOURITE CHOCOLATE:
Imagine being stuck in a traffic jam with almost an empty fuel tank. One sunny day, while going back home after attending lectures, you get stuck in a traffic jam. Your home is 15 km away, and with the available fuel, you can only go about another 5 km or slightly more. You forgot your wallet in the college canteen and are now left with a mere amount of ₹50. To add more to your troubles, you start feeling hungry (not actually but in the sense of craving). You see a chocolate shop round the corner, now, it will depend on your rational thinking, whether you choose to refuel your fuel tank a little or savour the delicious chocolate bar! What will you choose?
WHY DIAMONDS ARE SO COSTLY AND WATER SO CHEAP?
One may have encountered this question many times in life but seldom they know the answer of this question. Even numerous Economists cite this example but hardly ever they provide the prudent persons with the reasoning behind this. So, we will try to explain the reason behind the saying WHY DIAMONDS ARE SO COSTLY AND WATER SO CHEAP.
Human beings need water to quench his thrust, to survive, to keep the bodily fluids up to the marks, whereas diamonds are rather of no use (in practical/ survival situation), but even after that being said, people are more willing to pay to diamonds rather than paying for a bottle of water. The reason behind this concept can be understood by applying the principles of marginal thinking. The rationale is that a person’s willingness to pay for a good is based on the marginal benefits that an extra quantity of the good would repay. The marginal benefits, sequentially, is based on how much quantity a person already has. Even if water is essential for survival, it is found in abundance in juxtaposition to diamonds, but by variance, the cost of diamonds is drastically more because of the marginal profits they come along with.
CONCLUSION :
“Rational people think at the margin” is one of the most important topics in the field of Economics. Also, it is famous as one of the ten pillars of Economics, it plays a vital role in daily life and helps in enhancing economic sense. It is not merely a topic but a working principle which helps in leading an economically beneficial life. After looking at the above examples, we can understand what, where, and how much cost should be paid by keeping in mind the benefits which we are going to attain. By studying the above principles, theories and taking into consideration the illustrations, a prudent person may become well verse with this topic. We can also observe that people are not always rational, they may incur more cost then benefit at certain points of time in life (birthday parties, paying for dinner) but all in all, the satisfaction is maximized, after all, we all are human beings (Chocolate and fuel example). We can see how thinking rationally plays a vital role in a person’s life. This is a concept which we can relate to our day-to-day life, by applying it properly we can gain maximum satisfaction.
Aishwarya Says:
I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.
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