One of the best practice which I used to follow was to relate Economics with everyday life. Some of them I would love to share:- The principle of Diminishing Returns: - According to this principle as you consume more and more of a product; the satisfaction derived from each successful (or additional) unit of that product keeps on declining. Let’s take an example:- If you love Café Latte, Why don’t you drink 15 cups a day. Because the satisfaction (in economics known as utility) declines from every additional cup you consume. The first may give you the satisfaction of, let’s say, 5/5, the second would give you 3/5…., the fourth 0/5. Going ahead you could even become sick.
The concept of Opportunity Cost: - Opportunity Cost means what you are giving up to do something. Example: - you may choose to play football instead of talking over the phone with your girlfriend. So here the opportunity cost for playing football is talking over the phone with your girlfriend.
The concept of supply and demand: - Students used to ask me why in India prices of land keeps on going up? Why the traditional CRT Televisions are so cheap, when mobile phones 1/200th of its size are so expensive? Is it because of cost of making them is very less. Well not exactly, I mean can be one of the reason but not necessarily always. Prices are determined by the supply and demand forces. Supply means the total amount of goods or services available and demand means total number of goods or services customers is willing to buy. If there is a product which has 5 units available, and people who are ready to buy it are 100, the price for the same is bound to go high.
Scarcity and choice: - One of the first things that you learn in Economics is ‘Scarcity and Choice’. Scarcity means that the available resources are less, wherein wants are unlimited. For example if your pocket money is let’s say ` 600 (or $10), with that you cannot go for the movie, at the same time dine in a fancy restaurant, buy a nice pair of shoe, buy a gift for your girlfriend, and the like. There comes the concept of Choice. You have to choose among the various alternatives, which will give you maximum satisfaction, and would accommodate your budget as well.
Well to end this is how I used to relate the concepts of Economics with everyday life. Most of the students used to enjoy, some not but overall this practice paid a lot of dividends and helped in improving the overall results.
