The budget line concept can be critical in helping me to manage my money well. In most cases, I fail to make the right combinations of the commodities I need, thus making poor decisions. In essence, my failure to use the budget line technique has led to poor purchasing options, whereby I fail to purchase some commodities that I intend to buy. Going into stores, I usually have a list of commodities that I want to purchase; however, price fluctuations lead to a change of plans in the number of items I wanted to purchase for every commodity (Hutchinson, 2017). For instance, if I wanted to purchase foodstuffs and electrical appliances, I end up buying foodstuffs and forgoing the electrical appliances. The main reason for my poor decisions in purchasing poor understanding of the budget line concept.
With the knowledge learned on the budget line concept, I will be able to conduct effective purchasing, whereby I will be able to budget my income to fit my needs. In this case, I must ensure that I have a list of all the items that I need and the quantity of each item, which will satisfy my needs. Using the budget line concept, I will be able to attain the exact number of items that I need for the specific items. Therefore, my main considerations, in this case, will be my purchasing power and the commodities’ market price (University of Minnesota, 2021). With this data, it will be easier for me to make decisions that reflect my needs, purchasing power, and the pricing of each of the commodities that I need. I will also be able to save more on purchasing unnecessary commodities through the application of this technique. In essence, I end up spending unnecessarily on commodities that are non-essential to me. In the end, I regret my decisions after the realization of the losses that I made. However, with this technique, I will only purchase commodities that are within my budgetary plans, thus avoiding unnecessary expenditure.
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References
Hutchinson, E. (2017). The budget line: Principles of microeconomics. University of Victoria. https://pressbooks.bccampus.ca/uvicecon103/chapter/6-1-consumption-choices/
University of Minnesota (2021). Utility Maximization and demand: Indifference curve analysis- An alternative approach to understanding customer choice. https://open.lib.umn.edu/principleseconomics/chapter/7-3-indifference-curve-analysis-an-alternative-approach-to-understanding-consumer-choice/
