Here we discuss various economic examples like Supply Demand, Opportunity Costs, sunk cost Trade War, etc.Scarcity is one of the key concepts of economics. This has been a guide to Economic Examples. While these examples may not include all variants, they provide good economic insight. The above examples gave an overview of various economics concepts and laws, including the law of supply and demand, opportunity costs, sunk, and trade wars. the amount of corn needed to feed the people of the Country, the product has to be wasted, and farmers lose their cost of production. If the supply is too high, then the demand i.e. But the brand produces only 1000 quantities every month such that it receives the same number of orders every month and clears its inventory in a month.Įxample: When Corn crop production increases, the farmers decrease the crop price to sell off their produce. If the price is below $ 500, it would get orders of 10,000 per month. In an efficient market, the point where the supply curve and the demand curve meet is called the equilibrium point, and it is the point where the supply and demand are sufficient enough for each other to be met.Įxample: Consider a luxury handbag maker that sells luxury handbags and sells them at a price of $ 1000. Supply is the number of goods the producers float in the market, whereas Demand is the amount market participants are willing to buy. Supply and Demand is the basic law in economics. Since both the USA and China are large economies of the world, they not only impact their own countries but have an impact on global trade and the global economy. China retaliated with similar tariffs on US goods. The best example is the current trade war between the USA and China, where the USA initiated a higher tariff on goods imported from China. This creates a conflict situation popularly known as a trade war. By doing so, the other countries retaliate with even higher tariffs. Hence, Countries impose higher tariffs and taxes when the goods are imported from other parts of the world. As the local industry creates jobs, they would like to protect the interest of the Country’s businesses. Example 3 – The Trade WarĮvery nation tries to protect its economy, businesses, and industry. Whether the company produces or does not produce premium cricket bats, these costs remain unaffected. The cost of a factory or warehouse, among other items, do not consider because the company has already invested money in these assets, making them sunk costs.

Hence, while deciding if it needs to make premium bats, the Company will consider only the additional cost i.e. If the Company has to make premium bats, it will cost another $ 20. The bats thus prepared by the Company are very basic and do not compete with the other premium bats available in the market. It makes cricket bats at $ 50 and sells them at $ 90. Hence, the Company does not take this into consideration in decision-making.Ĭonsider a Company that makes bats for playing cricket. Sunk costs do not change while making future business decisions. Sunk costs represent past costs made by the company and are excluded from future decisions taken by the company for the business.

The business has already incurred a sunk cost, which cannot be recovered.

Economic principle definition