EconomicsEconomics

Economic ConceptsEconomic Concepts

There are four broad economic concepts There are four broad economic concepts that are connecting themes throughout that are connecting themes throughout the course:the course: Gain from tradeGain from trade IncentivesIncentives InterdependencyInterdependency ScarcityScarcity

Gain from TradeGain from Trade

Parties trade voluntarily when they Parties trade voluntarily when they expect to gain.expect to gain.

IncentivesIncentives

Parties respond predictably to positive Parties respond predictably to positive and negative incentives.and negative incentives.

InterdependencyInterdependency

Because of interdependency, a decision Because of interdependency, a decision made by one party has intended and made by one party has intended and unintended consequences on other unintended consequences on other parties.parties.

ScarcityScarcity

Scarcity of all resources forces parties to Scarcity of all resources forces parties to make choices and those choices always make choices and those choices always incur a cost.incur a cost.

““The first lesson of economics is The first lesson of economics is scarcity: There is never enough of scarcity: There is never enough of anything to satisfy all those who want anything to satisfy all those who want it. The first lesson of politics is to it. The first lesson of politics is to disregard the first lesson of disregard the first lesson of economics.”economics.”

-Thomas Sowell  (American -Thomas Sowell  (American economist, professor at Stanford)economist, professor at Stanford)