Using the Ordinary Business of Life to Understand Natural Laws of Economics
One of the problems with our elementary education today is that it waits far too long to introduce basic laws of economics.
I don't recall being exposed to these laws until I was almost ready to graduate high school.
I didn't receive further enlightenment until I entered college.
Such basic and useful laws like the law of supply and demand, demand curves, and the law of diminishing marginal utility can be easily understood by a five year old if taught right.
Most of us don't even recognize that we live these principles in some form or shape every day.
When I was a kid I knew that if I mowed lawns or worked a paper route I could make some money, period.
Had I been taught to understand the natural laws of economics, perhaps I could have understood better how to manage and improve upon either one of these businesses.
This would have in turn allowed me to be better prepared to pay for college instead of relying on student loans to make my way through higher education.
I only allow myself a brief moment to lament what could have been because I believe that many of the truly important things to know in life are either missing completely or woefully under-taught in our public schools.
So, allow me to share a few real life examples of how you can understand a few of the natural laws of economics that we see in the ordinary business of life.
I will start with a simple example of an individual and market demand curve.
In my house I have 4 children and it is like a small market.
If my kids want toys or video games, they have to do chores in order for me to either buy them what they want or give them the money so they can buy it themselves.
Each child's individual demand for a toy is equal to the law of demand and can be shown by an individual demand curve.
If I take the demand for toys of all four children I have a market and by taking the summation of all of their individual demands I can show a market demand curve.
When my children are determining whether they want something for the chore they have been asked to do, they are weighing the marginal utility or enjoyment that they receive from the toy and the chore required to get it.
If the chore is not too hard, they will enjoy the toy.
If the chore is too difficult they may determine that the enjoyment that they receive from the toy is not worth the effort to complete the chore.
Each child is going to do their best to get as many toys as possible, but only if the chores they are given fit their busy schedule of watching television and enjoying air conditioning.
The marginal utility for chores completed will go up until it will eventually reach a point of diminishing marginal utility.
If one child mows the yard, he is going to be so tired that the return for doing another chore is not going to be worth the effort.
He will keep the $20 worth of toys for mowing the yard and call it a day or tell dad he's too cheap and he can do it himself.
Just like eating pizza and drinking Coke, there comes a time where you eventually become sick.
If you have the budget to eat piece after piece and drink Coke after Coke the point where you get sick and want to throw up is the point of diminishing marginal utility.
Recognizing economics in the ordinary business of life can not only help you to better understand economics for you and your children, it can help you understand how to apply what you learn.
The more you learn, the better armed you are to make great choices.
I don't recall being exposed to these laws until I was almost ready to graduate high school.
I didn't receive further enlightenment until I entered college.
Such basic and useful laws like the law of supply and demand, demand curves, and the law of diminishing marginal utility can be easily understood by a five year old if taught right.
Most of us don't even recognize that we live these principles in some form or shape every day.
When I was a kid I knew that if I mowed lawns or worked a paper route I could make some money, period.
Had I been taught to understand the natural laws of economics, perhaps I could have understood better how to manage and improve upon either one of these businesses.
This would have in turn allowed me to be better prepared to pay for college instead of relying on student loans to make my way through higher education.
I only allow myself a brief moment to lament what could have been because I believe that many of the truly important things to know in life are either missing completely or woefully under-taught in our public schools.
So, allow me to share a few real life examples of how you can understand a few of the natural laws of economics that we see in the ordinary business of life.
I will start with a simple example of an individual and market demand curve.
In my house I have 4 children and it is like a small market.
If my kids want toys or video games, they have to do chores in order for me to either buy them what they want or give them the money so they can buy it themselves.
Each child's individual demand for a toy is equal to the law of demand and can be shown by an individual demand curve.
If I take the demand for toys of all four children I have a market and by taking the summation of all of their individual demands I can show a market demand curve.
When my children are determining whether they want something for the chore they have been asked to do, they are weighing the marginal utility or enjoyment that they receive from the toy and the chore required to get it.
If the chore is not too hard, they will enjoy the toy.
If the chore is too difficult they may determine that the enjoyment that they receive from the toy is not worth the effort to complete the chore.
Each child is going to do their best to get as many toys as possible, but only if the chores they are given fit their busy schedule of watching television and enjoying air conditioning.
The marginal utility for chores completed will go up until it will eventually reach a point of diminishing marginal utility.
If one child mows the yard, he is going to be so tired that the return for doing another chore is not going to be worth the effort.
He will keep the $20 worth of toys for mowing the yard and call it a day or tell dad he's too cheap and he can do it himself.
Just like eating pizza and drinking Coke, there comes a time where you eventually become sick.
If you have the budget to eat piece after piece and drink Coke after Coke the point where you get sick and want to throw up is the point of diminishing marginal utility.
Recognizing economics in the ordinary business of life can not only help you to better understand economics for you and your children, it can help you understand how to apply what you learn.
The more you learn, the better armed you are to make great choices.
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