Have you ever been half-asleep in class, just copying notes down as the instructor writes them on the board? Then, as you look at the long mathematical formula in front of you, you ask yourself; why am I even here? When am I ever going to use this? I know I have. A lot of the courses we are taught from a young age really do not have a lot to do with application to everyday life, they are designed to make our brain think in different ways and expand our skills. For example, higher level math is designed to grow your cognitive functions in your brain. However, when I first took Economics in high school, I realized it was different, it could actually be applied to everyday life.
Sure, as you copy down the definition of cross elasticity of demand you may have your doubts in my statement, but I encourage you not to think of economic concepts in their definition format, instead try to simplify them and apply them to your life. Economics is a science, and as a result, it can be tested and measured.
Economics, at its bare bones, is based on simple concepts. Supply and Demand for example, can be applied to almost anything in life. You want to buy the ECON 101 textbook used to save money, but so does 500 other students, and only 100 students are selling those. Well, demand exceeds supply, and there will be a bidding war. It can also happen vice versa, 500 upper year students want to sell their old ECON 101 book, but only 100 first years want to buy it, well supply exceeds demand and the suppliers are forced to lower their prices if they want to sell it. Elasticity simply measures the change in demand or supply, relative to another variable. For example, if University of Waterloo tripled their residence fees, we know that less people will want to live on residence, or perhaps even go to UW. But how many less? How responsive are consumers to the change in price? Elasticity measures this.
As a university student you will likely want to know how the economy is doing and which industries are doing well so you can find a job in that field after graduation. In Economics, we analyze these things. We know what a rise in inflation rate will do to our economy, or a lower monetary policy. We also understand that a rise in income results in a rise in demand, for most goods. With that being said, if average income rises, people are less likely to take the bus, and more likely to uber, cab, or get a car of their own. I encourage students not to memorize the definitions we are given, but to logically thinking of what would happen in each situation.
In addition to finding the right industry to work in, if you are investor, Economics can help you make money. Economics helps you understand what economies are doing well, which currencies to trade, when you hear in the news that the U.S central bank is increasing their fiscal policy, you do not need to ask your broker that that means, you should already know. On a micro-level, we can look at individual industries and apply basic economic principles to decide which companies are going to do the best.
We can apply economics to changes in people’s priorities. For example, now humanity is much more concerned with the well-being of the environment and healthy living. So we can see companies such as Tesla and health food companies grow year after year. Because of the increase in demand for these industries, we also know that there will be more producers entering the market to capitalize on it.
I hope I made myself clear in describing how Economics can be applied to everyday life and is not just another course that feels useless. If you have any questions, concerns, comments, feel free to reach out (my email is firstname.lastname@example.org) or leave a comment!