Using Microeconomics to Teach Life-Skills

Many parents may have studied economics during a bachelor’s degree. However, this article will teach them how to use microeconomics to teach basic life skills to children.

Scarcity

Your son must be introduced to the concept that we all have unlimited wants but limited resources. This implies that we must make decisions that give us the most satisfaction.

Opportunity Cost

This concept is the next best decision foregone. Your son will be trained that every decision that he makes will close the door to another decision. Thus, he is expected to understand the value and perhaps risk of his decision in the context of another benefit that he has lost.

Satisfaction

Many people think that satisfaction is an easy concept. It is the state of being contented. Unfortunately, economists are more interested in the marginal difference in satisfaction. For example, what is the increase in satisfaction of visiting Japan as compared to Thailand?

The reason is that with the specifics, it will be easier to provide incentives to make changes in consumption patterns.

Elasticity

This is the concept to measure the sensitivity of a change in one variable and how it will affect another variable. The application of this concept is that potential customers have different views of price changes in various products of the same industry. Thus pricing strategy should not be viewed as a solo effect but part of the eco-system of other products. Another way to apply the concept of elasticity is that the child will have to do a constant market check about wage expectations of his future industry. 

Barriers to Entry

Your son must understand that in a market, there are both tangible and intangible barriers to entry. The reason is that the incumbent firms have taken the risk of getting accepted by the consumers and they must legally create barriers to prevent the entrance of freeloaders.

In the same say, your son will be trained to appreciate all the training he has amassed to reach his first job interview. Thus, his academic qualifications can be viewed as a barrier to entry or an advantage for him to get the dream job.  

Price Mechanism

Economics brings about the interaction between the demand curve and the supply curve. Together, they introduce the equilibrium price which, at the same time, also highlights the existence of the consumer and producer surplus. This implies that if there is no perfect information, then the current clearing mechanism, maybe wages, may lead to inefficiency.

Thus, for your son to make the best decision, he must have access to the most relevant and accurate information. But why he does need to study? The reason is rather obvious. With the current tsunami of information provided by the internet, he must have the intellectual rigor and maturity to be able to make the best decisions within a short-given time.

Law of Diminishing Returns

Many economics students understand that the law of diminishing returns means that as more of a variable input is applied to a fixed input, the product will increase, reach a maximum point, and then decrease.

Your son can apply this in the situation that he just gets a bachelor’s degree and does not want to learn new skills. With time, he may find that his employability may not be attractive.

Market Failure

However, sometimes the market-clearing price may not be the best way of allocating scarce resources. Thus, there are many situations in which the government has to intervene by taxation, subsidies, or implementing price floors and ceilings. What is the implication of all this?

Your son may have a deep interest in knitting, but it may not be offered as an academic subject in the national university because there is not enough student demand to run the course. If the market demand for knitting changes, the government may reconsider its position and provide help.