The Economic Way of Thinking

The economic way of thinking is to analyze the scarcity of the resources in question and weigh the opportunity cost so that you can make the proper choice in an informed and logical manner. It is important to recognize that not all choices will involve large-scale shortages or surpluses, so you will need to weigh the marginal opportunity costs in order to make the best choice. It is vital to consider the secondary impacts of these choices; not just the immediate effect. The best way to become informed is to 'listen' to the market and understand what it is telling you. One of the ways that the market will 'tell' you what is happening with the supply and demand, is that there will be a change in price. Price can be a good rationing device provided that there are no price controls in place.

Additionally, it is important to be cautious and not assume that just because a price changes, that the demand for it will change. Other factors must be considered and accounted for when analyzing and attempting to 'predict' the market through graphs and charting. It should also be mentioned that you should use caution when taking into account other's claims. They may violate the "ceteris paribus" condition in their attempts to influence your decision making. Not all sources will tell you about the change in other variables and this could be misleading. You may have to compile all of your information, then build a theory as to why your choice is the correct one before you arrive at your final decision. (For example: Beyond the actual sunk cost of tuition and books, the price of a good economics grade is participating in class discussions, studying daily, checking my work and submitting assignments on time. If I am submitting my assignment on time, ceteris paribus, I will get a good grade.)