Susan Osburn is a medical technologist, classical singer, and mother of a fourteen-year-old son and three-old- daughter. She is currently taking graduate courses at George Mason University, Fairfax, Virginia.
When explaining economic concepts to adolescents, we adults will be best understood if we use plenty of concrete examples from the kids’ lives and surroundings. Here are some conversations that could have taken place between a graduate-student mother and her 14-year-old son, Sam.
Sam: Mom, I have to write a paper on economics for my social studies class. Can you explain some things to me, since you’re taking that course at George Mason?
Mom: Sure. What, for instance?
Sam: Like scarcity. Does that mean things that are hard to find? Like, you can almost never get one of Madonna’s earrings, but she dropped one at a concert and now someone’s selling it for $10,000!
Mom: Well, it’s a little like that, but scarcity in economics represents the whole idea that people have to exert themselves to-obtain things they want; there isn’t an unlimited supply that’s available effortlessly. It’s a general idea, meant to describe all human wants.
For example, in some ideas of heaven, it’s a place where you just imagine something and you have it available. No scarcity of anything, you get it all automatically—food, the right temperature and humidity, light, clothing, free haloes, even harp entertainment. Also, people in this heaven are satisfied with what’s there. They have no desire for different conditions or for rock music instead of harp music. But in real life, we have to do something like working or spending money to get what we want, and that creates an economy. In heaven there’d be no economy because there’d be no scarcity. Sam: Sounds boring!
Mom: I see what you mean. What else do you need to know about?
Sam: Opportunity cost. I don’t get it at all. Morn: Well, it’s the thing you have to give up whenever you choose something. It’s the option you lose because of your decision. Remember when you were saving money for snow skis, but you spent some of it on other things?
Sam: Yeah—I bought that neat vest from the Banana Republic catalog!
Mom: You lost the opportunity to build up your ski account when you did that. In fact, you set back your ski purchase a whole year, didn’t you?
Sam: Yeah—but I don’t care. I’d rather have the vest.
Mom: You decided that the opportunity to get the vest was worth the cost you paid—I don’t mean the price you paid Banana Republic, but what you took from yourself—giving up your skis for a whole year. You missed a year of skiing; now you’ll never know whether you’d have had fun, or broken your leg. And that choice was up to you. The delay in your ski purchase is the opportunity cost. You could say that you also lost the chance to buy a new bicycle, or a really good dictionary . . .
Sam: I’d hate to spend my ski money on those things!
Mom: That’s why neither of those things is the main opportunity cost. The skis are. You ranked the Banana Republic vest first, then the skis, then the other things. The option closest in your value system to the one you picked, the number two item on your list, is the primary opportunity cost. This is related to the idea of exchange.
Sam: I know what exchange is. The Stock Exchange! Or is it when you take things back to the store that Grandma gives you for Christmas? Or like when Bob traded me his Swiss army knife for my mini-telescope?
Mom: You’re getting warmer. In economics, exchange is any transaction you make in order to get more of what you want. You can even exchange with yourself, the way you do when you take money out of your ski account and spend it at Banana Republic. You did it because you really prefer the vest, right? Over building up your account?
Sam: Year. All the adults are mad at me for it, but . . .
Mom: That’s OK. This is an example. When you traded your mini-telescope to Bob, why did you do it?
Sam: His Swiss knife was so neat! It had a corkscrew, and . . .
Mom: Better than your telescope, right?
Sam: Definitely. Bob was dumb to trade it.
Mom: Then why did he trade it, if his knife was better than what he was getting?
Sam: He really wanted a telescope. He just felt that way.
Mom: So each of you thought you were getting something better. In every exchange between two parties, each person expects that what he’s getting will please him more than what he’s giving up.
Sam: I get it! But now this is really hard. Marginal utility and diminishing marginal utility . . .
Mom: No, it’s not so hard. If you have a lot of something, marginal utility is the value, to you, of the piece of that something you just acquired. The unit, you would say, you last added to your stock. You know those wild tropical shirts you wear, with all the leaves and flowers and bright colors?
Sam: Yeah! I’ve finally got enough of them!
Mom: What happened when you only had one’?
Sam: I was so glad to have it, and it was so special, I saved it to wear to the fair and the rock concert.
Mom: What happened when you got another shirt?
Sam: I wore it just to go out for burgers.
Mom: And another shirt?
Sam: I wore it just to go to Bob’s house on my bike. Because I didn’t care if I sweated on it, since I have others.
Mom: Did you get still another shirt?
Sam: Yeah, the one with the little guys and the canoes and palm trees.
Mom: Didn’t I see you wearing that one to cut the grass?
Sam: Uh-huh. And then I put it in the wash afterwards, because even if it fades or something, I still have the other shirts.
Mom: OK. That last shirt you got is less important to you than the others, even though it’s just as much in style, because you have several shirts now. You know that when you have someplace important to wear a shirt, like the fair, you’ll always have one. When you had only one, it was so special and valuable that you’d hardly touch it, but by the time you got your fourth shirt, you used it for lawn-mowing duty.
The reason you valued the fourth shirt less was the rule of diminishing marginal utility. Each shirt is a unit you acquire, and the value of each unit is shown by the least significant use you make of it, which is usually determined by your total stock of that item. The more you have, the less you care about each one you get. That’s all there is to it!
Sam: Economics is easier than I thought, i thought it was all about taxes and big companies.
Mom: You’ve been practicing economics, kid, ever since you decided to throw your food off the high chair and watch it fall rather than eat it.
Sam: Uh, thanks, Mom. I gotta go change shirts; I’m going to write my essay at Bob’s house. 
Next month, in part II of “Mom’ s Monopoly,” Sam and his mother discuss prices and entrepreneurship.