Econ 101 with a 6-year old

If you’ve read my blog lately, you know that I’ve been sharing a few of the conversations that I’ve had with our six year old son.  All three of these conversations happened in the same afternoon, running errands around town.  One of those conversations was about economics.

Jeep with doors offJust a bit of background:  My son has a thing for cars and other vehicles that look different.  Convertibles.  Monster trucks.  Garbage trucks.  He notices them.  Points out how awesome that pickup truck is — the one that you need a stepladder to get into.  Reminds us how he wants me to buy a convertible.  You get the idea.

We were sitting at an intersection when he noticed a Jeep Wrangler go by with its doors off.

Him:  Why do Jeeps sometimes have their doors off?

Me:  Because people sometimes like to drive with their doors off.

Yeah, but why can’t we?

Oh, because Jeeps are especially made so that their doors can be removed.

(Several seconds of silence . . . the kind of silence that tells you there’s another question coming soon.)

Why are special things expensive?

Why do you think special things are sometimes expensive?

I don’t know.

Do you think that expensive things sometimes cost more money to make?

Yeah.

Which do you think costs more to make — a convertible or a regular car?  (He has a thing for convertibles.)

The convertible.

Would you be willing to pay more money for a convertible than a regular car?

Yeah.

Suppose you invented something that a lot of people really liked.  Everyone thought it was pretty cool and wanted one.  Do you think they’d pay you money for to have one?

Yeah.

Do you think they’d be willing to pay you more for that new, cool invention than a regular version?

Yeah.

What makes you think they’d pay more for it?

Because they really want it.

What if you raised the price of the cool version?  What would happen?

No one would buy it any more.

Well, yeah, if you raised the price really high, no one would buy it.  But what if you raised the price just a little bit?  What do you think would happen then?

A lot of people would buy it.

And if a lot of people paid you a little more money for it, what would happen?

I’d have a lot of money.

Yep.

This was our first little life lesson on the effect of price on demand.  I’m under no illusion that this is a lesson that sticks with him right now or that he’s some budding entrepreneur.  A year ago, this would have been a simple “I want, I want, I want” conversation.  On this day, I’d like to think that this was a teaching moment . . . or at least an opportunity to look at “cool stuff” and their prices from the seller’s perspective.

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