Introduction to Economics - Relating the Words and Concepts to Students' Lives
Economics is the study of the allocation of scarce resources. It takes effort to produce something of value. Because producers invest time and effort to provide goods and services, they demand compensation from the consumers of their products and services. This compensation is the result of the consumer's own production of valuable goods. We are all producers and consumers. Each of us can produce only as much as our time, talent, and effort allows, and each of us can consume only as much as we can afford through the fruits of our labors.
The "price" consumers pay is determined by the balance of supply and demand for a given product. More popular products cost more than less popular products, and products that are in short supply cost more than more abundant products.
Students may initially view these explanations as abstract, or not relating to the reality of their everyday lives, or as difficult to understand. But we can all understand the desire to have experiences and obtain material objects, and we all know what it is like to not be able to satisfy all of those desires. We make choices and decisions all of the time. When we make these choices, we are making economic decisions.
The parent of the child who wants unlimited candy or no bed time decides to limit the satisfaction of those desires. In time the child becomes more independent and discovers through experience that unlimited consumption of sugar or a life with no sleep is neither desirable nor possible. The "price" of eating too much candy and sleeping to little is not justified by the short term satisfaction.
A teenage student who values his time with friends and wants to ignore school work to play video games, go to parties, or generally "hang out" is often forced by his parents to give the proper priority to school work. Or the young man learns through experience that the benefits of excelling in school and being in position to realize long term educational and career goals is worth sacrificing some social time. In this example, the price of neglecting school work is too costly to ignore, so the student decides to act in his best long term interests.
The competitive athlete who dreams of being a professional at the top of the sports world eventually realizes the hard work and the sacrifice of other desires necessary to attain such a level of proficiency. She is then left to weigh the joy and satisfaction gained by the act of honing her skills in the sport versus her desire to concentrate on other important areas of life.
Students can probably relate to some or all of these examples. The desire to consume or accomplish or experience comes at a price: sacrifice, work, or the exclusion of other worthy material things or experiences. So studying economics allows us to understand how people attain desired products and services by making decisions to work, sacrifice, and strive. When understood in the context of the study of economics, the words supply, demand, price, production, consumption, and the concept of "opportunity cost" give us a framework for making seemingly difficult topics like "tax policy," "budget deficits," "unfunded liabilities," "entitlement reform," and "debt crises" simple to comprehend.
Due to their age, students have only so many life experiences. The topics we will study, and therefore the vocabulary and the stories, may not always be familiar, but they will grasp the concepts after they get familiar with the new words and stories.