This was easily my favorite class for several reasons. Primarily the professor, Dr. Gerald Swanson, renowned in his field and, like me, an "older" geezer-type, had a distinct way of relating to the young kids. He actually got them/me thinking about economics in very simple terms. It isn't complicated.What is economics? It's an exchange. People engage in voluntary transactions they believe will make them better off. We usually think in terms of money: I have money and need a chair, you have a chair and need money. We exchange and everybody's happy. But economics can be about any exchange. I have a painting that you like, you have a chair that I like. If we both believe we will be better off with the other thing, we have an economic transaction.
Economics is a social science. It's all about human behavior. Human wants are insatiable - we all want more of something. Scarcity is a reality - we all have limited resources so we need to make good choices. Optimization is our goal; we want to maximize our well-being within the limits of our resources. I only have $50 to spend. What's the best chair I can get for $50? Or, can I get an adequate chair for just $30 and pocket the extra $20?
That's the thing about retail stores. Ideally retailers would never put the price on the things they're selling. Once they label something with a price, they're leaving money in the pocket of some consumers. Let's say I want to buy a pair of shoes and I'm willing to pay $80. So I go shopping. I find the perfect pair for $60. Only I know I'm willing to spend $80. If the shoe store owner could read my mind, he would have priced the shoes at $80 and we both would have been happy. Okay, we're both still happy, but he left me with an extra $20 that he could have gotten - he just didn't know it. But if he priced the shoes at $80 and the next person coming in the store could only pay $60, the retailer would also lose money because that person would walk out without buying.
As a retailer, how can I maximize my profit? By selling the same thing at different prices to different consumers. This is called price discrimination and is perfectly legal. Airlines do it every day. It doesn't cost the airline less to fly that plane on Tuesday, but they lower the price for people willing to fly on Tuesday because the airline is better off with a full plane at a lower price per ticket than a half-empty plane at regular price. Movie theaters have discounts based on age, time of day, student status, etc. They're called price-seekers - trying to find the maximum price each consumer is willing to pay.
Senior citizen discounts, coupons, limited-time offers, mail-in rebates - these are all examples of price discrimination. And once their fixed costs are covered, every additional sale is mostly profit anyway so it doesn't matter what they charge. This is why colleges have scholarships. Empty seats in a classroom can be filled at no additional cost to the university. They already covered their costs with tuition-paying students so the marginal cost of an additional student is zero! And the college gets to look noble and generous.
That's enough for today. But it's not the last you'll hear from me about economics. They should make this class a requirement for every student.