Students of economics, whether university undergraduate or graduate, with their knowledge of economic concepts, understand the definition of value as opposed to the definition of worth more keenly than other students.
This level of understanding leads to a more keen awareness of how to price your services as a tutor to meet the demand of your client base.
There is no disputing the impact of private tutoring as a global market, which is worth well over 100 billion dollars.
As a tutor with sought-after skills in economic concepts, you may feel entitled to claim your share ... but be aware of the critical thought that needs to go into this.
For example, how do you measure your worth in terms of your level of attainment, your practical knowledge and your skills when it comes to teaching?
The level to which your clients are interested in your service, and how much money they are willing to spend, indicates your market potential value.
People in need will generally not quibble over money when it comes to accessing top-quality learning and teaching.
That being as it is, it is also important to be aware that overly high prices for economics lessons, or other subjects, may well push you out of the market.
On the other hand, prices that are too low will, perhaps surprisingly, have the same effect.
Did I just write that correctly?
Yes! 'You get what you pay for' may be an idiom, but not in the positive sense as it implies that the reason the cost is low is because service is poor.
Now, we know that's not necessarily true with all teachers but the point is that people are conditioned to believe that the best things are never free, and will frequently ask 'What's the catch?'
Establish your reputation as a tutor who delivers economics lessons of high quality first.
Tutoring is a lucrative business. To build that reputation and break into the market will require a fair bit of ground work and some flair. So — use your expertise! Apply your knowledge of economic concepts and principles. Research the market. Do some cost analysis, then set your rates — not too high, not too low, and a price that makes both you and your students happy.
Let's start by examining a few principles of economics to find the best advice on how to cost your services, whether providing face-to-face economics lessons or economics classes online.
Find out more about how to start your tutoring journey.
The Third Principle of Economics: Think at the Margin
People only take action if the marginal benefit is greater than the marginal cost.
What does this mean?
Essentially, people want value for the money they spend. If the perceived value is (only marginally) greater than the financial cost, people are happy.
Value is ascertained by weighing up what is received against the cost of resources, packaging and production — and reputation.
The latter is of high importance. For example, a Givenchy handbag may do the same job as a bag from Target but people will happily pay an insane amount of money to own one.
For the sale of products, there are other factors that contribute to worth: display resources, advertising, wages of the employees of the business, cost of utilities to power the store. All of this is taken into consideration when pricing the product and people, as consumers, seem to be aware of this as they assess the cost against the long term usefulness of the product.
Services, on the other hand, can be harder to cost because of the need to focus on results.
In some cases, this is easy — if you get your hair done at a salon, the results are instantly obvious and people are aware that the cost incorporates the use of products, business overheads and wages.
As an economics tutor, however, this is much harder because everything about the business is intangible: your knowledge and skills, the resources you use, teaching ability and the personal qualities that build rapport and trust with your students.
When it comes to your economics lessons, you need to understand the difference between value and worth.
Value is the perceived imporance; worth is the price tag.
The worth of your economics lessons has to balance with the value students feel they gain.
It can be a tricky algorithm to determine, as different students place different values on learning. However, once you determine your market, you can start to build your pricing.
What Are You Worth?
Determining your worth as an economics tutor requires you to consider the economic concepts of equity and efficiency.
Efficiency is all about resources and the benefit they provide.
Equity refers to the distribution of resources through a society.
So, when it comes to your role as an economics tutor, your worth can be determined by:
- your resources, that is, your knowledge of economic concepts
- the society receiving the resources, that is, the economics students.
Factors, such as the time taken to prepare each lesson, travel time, online prowess (if you are delivering economics classes online) and the time you spend with each of your students, all contribute to the total worth of your expertise.
Equity, in the case of an economics tutor, can also be determined by your level of attainment in your own economics study.
Achieving equity means making a profit from your business.
Who knew that the 'simple' act of working out an hourly rate for teaching economics students could involve so many factors?
Considerations are equally as complicated for students, who may be asking the following questions:
- What is my financial position? Can I afford to enrol in university and have money left over to engage a private economics tutor?
- What is the value in obtaining a good grasp of concepts in economics?
- Will the money I spend learning be paid back by my future earning potential in the economics industry?
- What are my current, and future, financial obligations?
In a nutshell, the tutor is determining the worth of their business venture, and the students are weighing up their future financial status against the content of your lessons and the quality of your teaching.
And there is the definition of microeconomics.
What Incentives Do You Offer?
Savvy people compare cost and benefit before making a decision on whether or not to spend their hard-earned money. Human nature, however, makes people become influenced by market tactics, like special offers and free stuff, even if the thinking person knows it's just an advertising gimmick.
There is no more expensive thing than a free gift.
~ Michel de Montaigne ~
It's the word 'free' that draws us in. And the advertising industry in every market uses the word 'free' to its benefit.
However, you don't need to give things away for free to draw people in as you can use this economic principle in other ways:
- host a short course or seminar, offering your students a discounted rate
- offer group lessons, for individual students who live nearby each other, at a lower rate (or do them online for an even cheaper cost)
- provide an online economics course or lesson at a lower cost than your face-to-face economics lessons.
Consider offering a package course too — buy nine lessons and the tenth lesson is free.
And don't forget the power of online lessons!
Would you consider teaching microeconomics, macroeconomics or even international economics in an online environment?
Teaching economics lessons online increases your reach to a whole new level — geographic barriers are removed.
Teachers with Superprof have this all figured out. Most of them offer online lesson options and provide potential students with an incentive to engage initially by giving the first lesson for free as a trial.
It may seem to make no financial sense to give away an entire lesson for free but more than one study has shown that potential customers are more likely to approach you in the first place if there is no risk of wasting their money at the outset.
As far as rate guidelines go, there are no regulations when it comes to tutoring lessons — the level doesn't matter (primary school, high school or university undergraduate to graduate) and neither does the subject (science, maths, business, economics ... whatever).
However, there are several places you can look to help you gain some insight into how to attract the students you are looking to work with.
How Much Do Other Tutors Charge for Economics Classes Online or In Person?
Number six in the ten principles of economics says:
A market is a good way to organise economic activity.
This principle revolves around the allocation of resources and the interactions of different stakeholders (that is, business firms and personal) within the market.
With regards to tutoring and teaching:
- the business firm is representative of the tutoring body as a whole, where the interest lies in the learning of students
- personal stakeholders represent potential clients (that is, students) who are searching for the best tutor.
The father of economics, Adam Smith, suggested that while the primary motivation of most people is self-interest, the collective self-interest eventually translates into the promotion of the economic wellbeing of the society.
In a nutshell, this means that although you might like to charge a super high rate for your economics lessons, you won't because the market economy generally dictates your rates to bring them in line with your local market, which, in turn, is based on the needs of your society.
A tutor in Sydney will generally cost more than one in Melbourne or Perth. And, if your students live outside of the capitals, you may charge a little more for travel expenses.
It's good practice to study the tutoring market in your local area and to use this knowledge to work out whether it will be more viable, in a financial sense, to offer online lessons, host a group course or workshop or have students come to you. You can also use this research to work out how many lessons you need to teach over a week to help meet your financial needs and goals.
To get you started, we've compiled a table of estimated average tuition fees in each capital city in Australia, comparing three key subjects. The table is located at the end of this article.
Do you have a point of difference?
More and more people are starting business ventures in the tutoring market. This means it is becoming increasingly important that you, as an economics tutor, have a saleable point of difference that will attract students to your service. This point of difference may be your teaching strategies or the learning environment you create.
Think about what you have the ability to offer your students.
- Do you prepare individualised lesson plans?
- Can you provide an analysis of the progress your students are making?
- Do you create your own resources, or just use the textbooks and other resources provided by your students or used at school?
- Is your teaching style more of a lecture, or is it interactive and student-led?
It's important to gain an understanding of the learning style of your students and have the ability to modify your teaching style to suit.
A balance of consistency and flexibility is the key to becoming a sought-after market commodity.
What It's All About
The career market for economics teachers is similar to other business organisations and follows the same economic principles.
- Principle 1: people face trade-offs but these don't indicate the decisions that are made
- Principle 3: people think at the margin so make your pricing competitive and in line with your level of experience
- Principle 4: incentives are what people respond to, so offering free deals or discounts is good for business
- Principle 6: organise economic activity through the market, so join the market to get more exposure.
Continue analysing your business and the market in line with Gregory Mankiw's other economic principles to achieve the best outcome possible.
Best of luck.
Let us know how it works out for you.
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