Lesson 1: Seven Principles Of Economic Thinking

Question 1

What are the 7 principles?

Answer 1

1. Scarcity Forces Tradeoffs
2. Cost versus Benefits
3. Thinking at the Margin
4. Incentives Matter
5. Trade Makes People Better Off
6. Markets Coordinate Trade
7. Future Consequences Count

Question 2

What is principle 1?

Answer 2

Scarcity Forces Tradeoffs:

because our wants are unlimited but resources aren’t, we will always be forced to make a choice for what we want the most.

Question 3

What is principle 2?

Answer 3

Costs Versus Benefits:

Comparing costs and benefits to determine whether an alternative is better than another choice.

Question 4

What is principle 3?

Answer 4

Thinking at the Margin:

Making choices means increasing time spent on one task, at the cost of less time spent on another. Not to go all in one decision, but splitting time between several tasks.

Question 5

What is principle 4?

Answer 5

Incentives Matter:

People respond to incentives in predictable ways, majority of the time.

Question 6

What is principle 5?

Answer 6

Trade Makes People Better Off:

By focusing on what we do well and then trading with others, we end up with more and better choices.

Question 7

What is principle 6?

Answer 7

Markets Coordinate Trade:

Markets usually do better than anyone or anything else at coordinating exchanges between buyers and sellers. (Limited government involvement ensures that buyers and sellers are satisfied with their trades)

Question 8

What is principle 7?

Answer 8

Future Consequences Count:

Decisions made have lasting consequences.