Basic Economics Every Teen Should Know By: Sujal Mirchandani

  Basic Economics Every Teen Should Know

By: Sujal Mirchandani

Economics might sound like a boring subject area which only grown ups might be interested in. But, after taking Microeconomics in school, I have realized that some of the concepts in the class apply to all of our lives and it is important that we learn them. Knowing the fundamentals of economics can help us be more educated and make smarter choices with our money. Economics is especially important to teenagers since they are most likely to be wasteful and inconsiderate with money. 

The most important concept in economics is supply and demand. It basically implies that when there is a large number of goods or services, people demand it less and are willing to pay a lower price. But, when there’s only a small number of goods or services, this makes the product more appealing to consumers and forces people to pay a premium price. Basically, whenever the supply is low, the demand is high, and whenever the supply is high, the demand is low. This is important for teenagers because they are inclined towards paying high prices for things such as shoes, video games, clothes, etc. since there is a low supply. Teenagers need to understand how they are being influenced to purchase something just because it is rare. 

Another economics concept is opportunity cost. It deals with the next best thing you could have done with your resources once you have used them. For example, if I spend my time studying for a math test I have tomorrow, my opportunity cost is the time I could have spent playing basketball outside with my friends. There is opportunity cost involved each time you make a decision, which is why you must make smart decisions with your limited resources. Knowing about this concept will make teenagers be less wasteful with their time and money. If they understand different ways they can utilize their resources, they will be more likely to make smarter decisions. 

Lastly, teenagers need to understand the concept of marginal utility, which represents the additional satisfaction a person receives with one additional unit of good. For example, if I am craving donuts, my marginal utility for the first donut would be 500 since it will give me high satisfaction. But, as I consume more donuts, I would start to enjoy it less and less, dropping my marginal utility with each additional donut. Therefore, the smartest choice would be to consume until my marginal utility is proportional to the marginal cost of donuts. Understanding this will help teens be more mindful of what they are purchasing and if it's worth the price they are paying for it. 

I believe that everyone can greatly benefit from learning some economics because it makes us more informed as individuals and consumers. Knowing the basics of economics will make you more mindful of what’s going on in the economy, such as inflation, unemployment, etc, which is important because it affects you as an individual.