So you’re teaching economics. Where do you start??
When I started putting together my economics lessons I knew I should start with the basics. But first, a confession: In the decade since I took an economics course I forgot the basics 😱
Now, with that confession off my chest, here’s where I started: What is economics?
I begin my class with asking students that seemingly simple question. But no, really, what is the definition? Students (and probably most adults – myself included, no shame) usually say “something related to money.” And yes, economics is related to money, but it is so much more than money.
What is ECONOMICS? Economics is the study of scarcity.
What is SCARCITY? Unlimited wants and limited resources.
So economics is a study of how individuals, businesses, and governments deal with scarcity. We all have insufficient resources (money, time, energy, etc.) to fulfill all of our desires, so what choices do we make? What are our priorities? Why do we make those decisions and what are the effects?
Economics is all about choices. And every choice involves a cost and a tradeoff. This is a simple concept for high school students to grasp. What do they do when the last school bell rings at 2:45pm? Do they choose to go to practice? To work? To study? To scroll through Instagram? To make dinner for their family and care for their siblings? What else could they be doing with their time after school?
TRADEOFFS are involved in every decision. There are always other ways we can spend our time, money, energy, or (especially in the case of businesses or governments) resources. A tradeoff is simply what you give up when you make your choice.
Simple example tradeoffs:
- A students needs more money. She decides to get a job after school, but the tradeoff is that she must quit the basketball team.
- A pizza shop wants to sell more pizzas. The owner decides to upgrade the kitchen equipment, but cannot hire a new delivery driver.
- A local government wants to improve transportation. The mayor proposes to pave potholes, but cannot buy a new city bus.
Assuming we are rational (😬), we would perform a COST-BENEFIT ANALYSIS to help use make the right decision. This approach weighs the BENEFITS (advantage or profit gained) against the COSTS (the amount that has to be paid or given up).
The student who quits the basketball team should get more out of her new job than her membership on the basketball team if she performs a cost-benefit analysis. It’s a simple concept, but sometimes we find ourselves wasting time or energy prioritizing the things that do not bring us as much joy or satisfaction.
An important component when performing a cost-benefit analysis is considering your opportunity cost. Tradeoffs can be infinite, so weighing our opportunity cost is incredibly important when making logical decisions. An OPPORTUNITY COST is your highest valued tradoff — it is the next best alternative when a choice is made. In other words, it’s the thing that “comes in second.”
An opportunity cost is only one thing and is different for everyone. If I decide to order pizza for dinner, I could have used that $20 for a number of different things. I could have ordered wings instead, or bought a new fast-fashion shirt, or saved for a new crossfit jump rope, or bought a gift for my mom. My personal opportunity cost is whichever of those tradeoffs is most highly valued to me. Since I’m a good daughter (😇) I could make the choice to eat cereal at home for dinner and use that $20 to buy a book for my mom. The gift for my mom would be my opportunity cost. Your’s might be different.
The beauty of opportunity costs is that if you are conscious about how you are spending your money, time, and energy, you can make better decisions that can lead to a happier life. Instead of mindlessly spending your precious limited resources, putting these resources toward the things that bring you the most joy is so important for your overall well-being.
Being aware of my opportunity costs has helped me avoid time scrolling Twitter when I could be taking the dogs for a walk, or meeting friends for happy hour glasses of wine and appetizers instead of a stuffy dinner. Harnessing the power of economics and opportunity costs can truly help led to a happier you. Hooray! And that’s a great lesson for teenagers and adults alike.
And that’s the quick and dirty introduction to economics. And it’s easy to make connections to students’ lives. I hear the common refrain “when am I going to use this???” from students, but when it comes to economics it’s obvious how they can use this. It’s up to teachers to provide opportunities for students to explore their own real-life choices — from the relatively insignificant (Should I see this movie on Friday? Should I get chicken nuggets for lunch?) to the important (Should I try out for the play? Should I stop engaging in drama with my friend?) to the ones that have major future ramifications (Should I take out student loans? Should I study nursing?). I find that students are eager to talk through their issues, and economics class can offer a unique opportunity to think about our decisions in a rational way.