Economics is a study of how society manages its scarce resources. The literal translation for economy is “one who manages a household. ” “In an increasingly complex world connected by social and economic interaction and interdependence, news of stock market fluctuations, consumer confidence scores, and various economic indicators fill the media” (Broome & Preston-Grimes, 2011). This means that economics is everywhere, even in a home. Every household makes decisions that follow the economic principles. There are tradeoffs, and incentives.
Supply and demand regularly show up in a household setting, as do decisions regarding limits on price and time. I am a single mom and the science of economics is a daily occurrence, at the grocery store, while doing homework, and in my choice of home and bills. Economics is an inevitable part of most people’s daily lives. It occurs in every facet of home, work, and school. There are ten principles to economics. They are the decisions that need to be made in regards to the jobs that need to be done, and the management of the resources that will allow the necessities to be provided.
One of the principles that occur most in my daily life is tradeoffs. Tradeoffs occur when a person has to choose between one thing and another, forgoing one desirable option, for the more beneficial, sometimes undesired option. In a study done in 2011, a Montessori middle school set up a school store. Some of the students just ran the store, some of them bought items to sell, and others made things to sell in the store. The kids that ran the store did so as a trade-off of playing at their lunch or hanging out with their friends.
Sam was one of the students who chose to make something to sell in the store. Sam traded his time on Sunday to make pretzel bites to sell, instead of doing something else of his own desire. Tradeoffs are common in my life, as I am a working mother of 4 children, who is now going to school full time. I often choose between sleep and homework, and sometimes, homework and extra time with my children. There is also the trade-off of being with friends or keeping my house clean. I could probably list a few hundred tradeoffs that occur during my day.
Another principle of economics is incentive. Incentives are a form of motivation for a person to do something; a simple example of incentives is being paid working wages. The Montessori school children in the study had an incentive for their school to do well; the profit would be funds for a school trip at the end of the year. The better their school store did the more money they had at the end of the year (Broome & Preston-Grimes, 2011). Incentives are one of the principles that show up in my daily life regularly. With four children in one house, the concept of incentives is crucial.
There are chores to be done daily, and the incentive of money as a reward is one of the incentives I use. In my job, I also receive the incentive of money for working. Incentives also show up while driving; not getting a speeding ticket is the incentive for driving the speed limit. Tradeoffs and incentives are only two of the ten principles that I come across in my life at home. Not only am I a mom but I am a manager of a floral shop in a town close to me. Supply and demand are so very apparent in my field, and it is a very fluid thing. The supply that I handle daily is obviously the flowers.
Our flowers come from various places from all over the world. Supply is based on seasons, weather, and time of travel. The supply of our goods stays relatively the same. The demand of flowers is the fluid piece of our industry. When the calendar works towards a holiday, the demand goes up. Take for example, Valentine’s Day, the demand of flowers, more specifically, roses, increase. Our supplier has only a certain amount of flowers available. Because the demand is high, the suppliers cannot keep up and our shops supply gets a bit scarce. The closer it gets to Valentine’s Day the higher the price of roses gets.
Our shop sets a minimum for flower orders but then has to raise the minimum because our supplier has raised our price of roses. When supply and demand is in play the consumer has choices to make. Each customer will have their willingness to pay or “the maximum amount that a buyer will pay for a good” (Mankiw, 2007). The result of their savings is consumer surplus, which is defined as the amount a buyer is willing to pay for a good, minus the amount the buyer actually pays for it (Mankiw, 2007). When ordering flowers, each customer has a price limit in mind for their arrangement.
If the price of our flowers is above what the customer is willing to pay they will go somewhere else to find the flowers. Just like the customer, I as a single mom, have a limit that I can pay on things in my life. The biggest item that comes into play for consumer surplus is rent. Having had a price in mind for rent, I went looking for a place big enough for my children and I to live in. Let’s say I budgeted $1000, and looked at 3 different homes. One home was $1200, the second was $950 and the last was $800. As a person who wants to save money, the larger consumer surplus would be my goal.
The first house is obviously not a choice because it is higher priced than what I am willing to pay. The second and third are both options because the prices are under my $1000, and relatively the same size. I opted for the $800 home so that I would have that extra $200 per month to use on food or utilities which makes my consumer surplus $200 per month. Economics is the study of how people interact with their world. How they make decisions based on price, tradeoffs and incentives. As a mother, this science is my life. I have tradeoffs because of school, work and children.
I deal with incentives when it comes to doing chores around my house as well as when I go to work. While at work my life is controlled by the supply and demand of flowers and holidays. When I come home to my house, I am walking into my consumer surplus because of choices I made while searching for my home. As I am writing this I am in the trade off of sleep to complete my homework. Economics has saturated my daily life and will continue to do so. In conclusion, the science and study of economics is in every part of life, and it will continue to be as long as people allocate resources, and manage households.