INCENTIVESThe Big Idea andthe Seven Secretsfor Thinking Like anEconomistStudent Workbook
THE SCARCITY CONDITION• Scarcity• What is Economics?
INCENTIVESThe Big Idea • _______ and ________ incentives: – Grades • _______ and _______ incentives: – Unintended consequences • Incentives and _________ • Incentives are everywhere
The Seven Secrets: Life is About Trade-Offs• Examples of trade-offs: – College versus working, or a little of both – Cleaner environment or more production
The Seven Secrets: Opportunity Cost• What is Opportunity Cost?
The Seven Secrets: Marginal Thinking• What is marginal thinking?
The Seven Secrets: Trade Creates Value• Trade and __________ __________
The Seven Secrets: Markets Generally Work Well…..• The ________ economy: – eBay, craigslist, stock market, supermarkets – The role of _______• Adam Smith, the Father of Economic Thought – It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. – Wealth of Nations, 1776
The Seven Secrets: …But Markets Sometimes Need a Hand• Market _______ • Poorly defined _______ _______ • _______ • _______ _______ • _______ _______
The Seven Secrets: Our Decisions Have ConsequencesNow and in the Future• _______ and _______ goods.• The _______ _______
The Seven Secrets: There are No Free Lunches• “Free” is a four-letter word! – Who is paying?