1. Microeconomics application in the real world
Microeconomics is considered one of the primary subject
of social science of economics. It discusses of mostly the
conduct of consumers, individuals, firms and also industries. It
is a study that examines how household, firms, and individuals
make decisions to allocate the limited resources in markets
where goods and services are being bought and sold.
Microeconomics also focus on how these individual`s behavior
and decisions affect the supply and demand for goods and
services which determine how these prices are set in the market.
Microeconomics has numerous concepts that apply to a real-
world situation. It has always been a fact that the availability of
resources is always limited to the world eventhough it varies in
amounts. On the contrary, individuals and firms have unlimited
needs and wants which is difficult for economists to come up
with solutions to fully utilise the resources. Therefore, one must
learn to prioritize their needs and wants in order to use the
resources efficiently. There are numerous numbers of
microeconomics concepts that can be applied in real world
situations. In conjunction, there are some important concepts

2. that are relevant to this discussion which is scarcity, demand and
supply, elasicity and barriers to entry.
First of all, one of the most evident real life implications of
microeconomics concepts in our daily routine is the scarcity.
Scarcity is the primary key to economic problem as apparently
individuals needs and wants are always infinity in this world
with limited resources. In this society, there will always be
insufficient resources to fulfill all human needs and wants. On
the other hand, scarcity occurs when individuals want more of
something than it is available which forces them to make a
choice. For instance, fresh water and food supply are always
scarce in Africa. Which means that, Africa has been facing the
shortage of fresh water and food supply in their country.
Scarcity in Africa has always been serious where there are often
situations that there is not enough water to meet all demands. In
fact, Africans are known to be a chronically water stressed
country. According to the articles I found online, economics
development has greatly affected the water supply in Africa.
Experts say that the shortage of fresh water and food supply
could be salvaged if more water treatments are given. Crops can

3. also grow better with fresher water and food supply will
generally increase too. Another way to relieve water stress is to
increase the capacity of water storage. Some experts also say
that reservation of fresh water will be more sustainable if large
dam projects are being carried out.
Supply and demand is an economic model to determine
price in a market. Supply and demand are perhaps the backbone
of an economy in market. The law of supply and demand is not a
law, instead it defines the interaction between the availability of
a good and the wants for that good has on price. Generally if
there is a high demand on a product but with a low supply, the
price will be high. In contrast, the higher the supply for the
product, the lower the demand will be, and the price will also be

4. low too. Let`s say, Apple Iphone 5th
generation, when it was
launched there were people lining up outside the stores wanting
to get the phone despite the low supply of it. Which is why the
price of the product could be maintained at a high price. In short,
the demand for the Apple Ipone 5 is high but with a low supply
which makes people to queue outside wanting to get the phone
as quick as possible. This allow Apple stores to be able to set the
price of the phone high and being maintained. As time goes by,
the demand for Iphone5 will drop as new phones have been
launched. At this time, low demand for the product that
eventually leads to low supply of it and so the price will also
drop.

5. The picture explained the number of millions of iphone sales for the first three days launch
from year 2008 to 2012
The graph above shows the supply and demand for iphone 5
Elasticity is the measurement of how amending an
economic variable affects the rest. There are two variables that
respond differently to changes which are elastic variable and
inelastic variable. Elastic variable responds a lot to small
changes whereby inelastic variable does not respond much to
changes. In short, elasticity is the measure of sensitivity of a
variable. It refers to the degree where consumers or producers
change their demand and supply in response to the price or

6. income changes. The most evident real life example would be
gasoline. If there is a very large change in the price, only a small
amount of change will appear in the quantity demanded. Thus,
gasoline is relatively inelastic. As the price of the Petronas
gasoline increases, the quantity demanded for it will not
decrease very much. This is because there are not many good
substitutes for gasoline that will make consumers to buy even if
it is at high price. This explains why gasoline is described as
inelastic variable. On the other hand, elastic goods and services
have numerous numbers of substitutes. When an elastic good or
service`s price decreases, the quantity demanded of that good
will increase very quickly. For example, Perodua decrease the
price of its car during every June of the year, the number of
demand will increase drastically as the price decreases. This
explains that the elasticity of Perodua cars is elastic.

7. The picture above shows us that Perodua is having a promotion for June 2013
The picture above tells us that certain petrol station offers a 15cents off for every litre
pumped

8. Furthermore, barriers to entry exist because of government
intervention and they occur naturally within the business world.
The purpose of barriers to entry is mainly to improvise industry
regulation, conducting special tax to benefit existing firms and
also to apply legislative limitations on new firms. In another
way, it benefits existing firms operating in the market as though
to prevent the existing firm’s profits and revenues from being
snatched away by new rivals. According to Michael Porter,
markets are classified into four general cases, which are high
barrier to entry and high exit barrier, high barrier to entry and
low exit barrier, low barrier to entry and high exit barrier and
low barrier to entry and low exit barrier. Markets with high
barrier to entry have very few competitors and has high profit
margins. This makes them to be a natural monopoly. Monopoly
is an industry that consists of only one firm that sells good
wthout substitutes. Tenaga Nasional Berhad (TNB) is the best
example of monopoly firm in Malaysia. It is the only one firm in
Malaysia that supplies electricity to every house holds. In an
oligopoly, there are only a few companies that sell the same
goods and services. The group of companies controls the price
of the goods or services. Oligopolistic companies produce goods

9. and services which are almost identical. One of the examples of
an oligopolistic firm in Malaysia is Digi telecommunication.
There are only a few telecommunication firms in Malaysia
which has made Digi an oligopoly company. In addition,
monopolistic differs from perfect competition in ways that all
companies produce the same but not perfectly substitutable
products. All of these firms are profit maximizer. One of the
example of monopolistic firm is Apple store that sells Iphone as
they have many substitutable goods like Samsung or Nokia
existing. Last but not least, perfect competition is a market
structure whereby all firms are selling identical product and
being characterized as a free entry and exit industry.
The graph above illustrates the financial data of Tenaga Nasional Berhad (TNB) from year

10. 2004 to 2010
Barriers to entry
Economics may seem to be a subject full with theories and
calculations, but it actually applies in our daily life and real
world. Economics studies how human and firms interact with
each other in every ways to satisfy their needs and wants. To
illustrate this, it is important to understand the applications of
microeconomics in real world to allow us to be rational in
decision-making and make sure every decisions made are

11. beneficial in every aspects of our life. Hence, economics plays a
key role in giving you new view on some of the most
challenging problems the world faced today.