1. Economic Concepts
1. Scarcity – You can’t always get what you want – 11. Opportunity costs – The costs of something is what
almost everything is scarce you have to give up to get it. It is the only cost
2. Property rights – Because goods are scarce there is
individuals establish rights over time 12. Trade offs – People give up one thing to get
3. Institutions – Institutions matter because they something else. Making decisions requires trading
affect incentives – they are the “rules of the game” off one goal against another
4. Preferences – People have preferences which allow 13. Information – Information is never perfect, so
them to choose what is best for them individuals do their best they can when they make
5. Rationality – People respond to incentives – the decisions
costs and benefits of the options they face 14. Comparative advantage – People do what they are
6. Constraints – There is never free choice – people relatively better at doing
are always restricted in their decisions 15. Supply and demand – As price rises, buyers demand
7. Marginality – People make decisions based on the less and sellers supply more
benefits they will receive from trading the next unit 16. Trade – Specialisation and trade allow more to be
of goods and services produced and consumed and make everybody
8. Incentives – People respond to the incentives better off
induced by the costs and benefits of their actions 17. Value – A thing is worth what people will pay for
9. Sunk costs – The past is the past – sunk costs are it, and it isn’t worth anything else
irrelevant 18. Prices – things cost what they cost – it is impossible
10. Discount rates – People value the present more to fix prices
than the future 19. Markets – Markets competition and prices work
efficiently to allocate resources. But markets are
not fair
20. Government – Governments can intervene and may
improve market outcomes when a market fails