I've been in the class for about half a year now, and if I could give any piece of advice to a student planning to take economics, it's that there really is nothing to fear. As Charles Wheelan, author of Naked Economics said:
In just over 300 pages you will have a clear understanding of the most important econ omic terms , the excitement of economics, and how it is relevant to everyday life.
If the book has taught me anything so far, it is that human behavior is driven by incentives. An incentive is what motivates us to behave a certain way, it provides an explanation for the decisions we make.
Why buy designer purses when there are equally as nice and more affordable purses out there? Why have Brussels sprouts for lunch instead of a delicious juicy burger? Why go out to eat in a restaurant instead of just eating at home?
A second concept which stood out to me was that of o pp ortunity cost , which refers to the foregone alternative when making a decision. For instance, suppose you have a big math test on Monday but your mom invites you to watch a movie with her on Sunday night. Your opportunity cost of going to the movies is risking getting a bad grade on the test.
As mentioned in the book, the real "cost" of a decision refers to more than just MONEY. There's nothing "free" about getting a celebrities autograph if you have to spend 7 hours waiting outside. Your time is equally, if not more valuable than your money at times, so there really is no such thing as a "free lunch".
Just like incentives play a big role in the decisions we make, opportunity cost does too. Think about it. Before eating that big slice of chocolate cake, you've probably already weighed in the pro's and con's--the opportunity cost--of doing so.
The final concept that Whelan made a great point of highlighting was VALUE. The best way for a firm to sell itself to it's customers is by creating unique products that will act as a barrier to all the other similar product out there. The tricky part is trying to create a product of value that is worth far more than the cost of its inputs.
What I found very ironic--but true--was how "the market rewards scarcity, which has no inherent relation to value. Diomands are worth thousands of dollars a carat while water is nearly free. If there were no diamonds on the planet we would be inconvenienced; if all the water disappeared we would be dead. The market does not provide goods that we need; it provides goods that we want to buy."
Scary right? Economics makes you think that way.