| The Law that Rules is the article | | | | the quantity demanded at each given |
| written by Steven Rosen and posted in | | | | price. It can be represented on a graph |
| "kansascity dot com" on March 27, 2005. | | | | as a line or curve by plotting the |
| Steven Rosen once a month offers basic | | | | quantity demanded at each price. It can |
| economic concepts that can be easily | | | | also be described mathematically by a |
| explained to kids, so they can form | | | | demand equation. The main determinants |
| their vision of how the real-adult world | | | | of the quantity one is willing to |
| works. This time Rosen's ninth | | | | purchase will typically be the price of |
| installment (that is the way he calls | | | | the good, one's level of income, |
| his articles; altogether there will be | | | | personal tastes, the price of substitute |
| twelve installments) explained the basic | | | | goods, and the price of complementary |
| rule of economics: the rule of supply | | | | goods. |
| and demand. He explains the law of | | | | To make this concept simpler to children |
| supply and demand using dolls, stuffed | | | | the author suggests asking children |
| animals, trading cards, plastic | | | | questions about the things that they |
| wristbands and other things that kids | | | | collect. For instance, ask why some |
| like to collect. Kids' collectibles are | | | | particular toy is special and more |
| the things that they will be most | | | | valuable than another one. The answer |
| willing to spend their money on. | | | | would probably be that particular items |
| The topic of supply and demand was | | | | are limited or have unique design. Then |
| chosen because it is a necessarily | | | | Rosen proposes to go further and |
| starting point for understanding how the | | | | question kids what their actions would |
| prices are formed. As examples that will | | | | be if their friends or neighbors had an |
| be easily comprehendible by kids the | | | | identical toy. Would they desire to |
| author uses prices for pizza, toys, and | | | | exchange it? For how much would they |
| iPods. Kids would buy all those things | | | | price it? If, on the other hand, only |
| with their money, so it is a real life | | | | one friend had it, would it increase the |
| example that is closer to them than for | | | | demand and what would the price be in |
| example the formation of prices for oil. | | | | that case? Rosen also tells to construct |
| Rosen explains supply as the amount of a | | | | open-ended questions for kids, this way |
| product or service that a business is | | | | kids receive an opportunity to present |
| willing to offer for sale; and demand as | | | | their vision of the situation which |
| how much purchasers would buy and what | | | | significantly speeds up their |
| they'd pay. Supply deals with production | | | | understanding of the market. By using |
| and demand with desire and popularity. | | | | the examples that Rosen suggests, kids |
| Rosen is pretty close in his | | | | automatically get the idea of the price |
| explanations, however, if we want to be | | | | elasticity of demand and price |
| precise in definitions then we will have | | | | elasticity of supply. |
| supply as the quantity that producers | | | | The author also gives other suggestions |
| are willing to sell at a given price. | | | | of explaining the rule of demand and |
| For instance, the soft drink | | | | supply. One of the cases is the |
| manufacturer may be willing to produce 1 | | | | formation of prices for fuel. Actually, |
| million packages of some soft drink if | | | | supply and demand is only the part |
| the price is $1 and significantly more | | | | components that set the price. But the |
| if the market price is $2. The core | | | | discussion can be focused on driving |
| determinants of the amount of packages | | | | habits, cutting off the not necessary |
| of a soft drink that a company is | | | | driving, drive a more fuel-efficient |
| willing to produce will generally be the | | | | vehicle. |
| market price of the good. Demand is the | | | | The number of topics that can be used |
| quantity that consumers are willing and | | | | for discussion is countless; what the |
| able to buy at a given price over a | | | | author thinks really important is to |
| period of time. For an illustration, a | | | | keep a child interested and at the same |
| consumer may be willing to purchase 30 | | | | time entertained by the conversation |
| packages of a soft drink in the next | | | | which will help the process of |
| year if the price is $1 per bag, and may | | | | understanding. The kids' awareness of |
| be willing to purchase only 10 bags if | | | | such basic economic issues plays an |
| the price is $2 per package. A demand | | | | essential role in how they will manage |
| schedule can be constructed that shows | | | | their funds in the future. |