How Can You Think Like An Economist The

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How Can You Think Like An Economist? � The 7 Principles of Economic Thinking

How Can You Think Like An Economist? � The 7 Principles of Economic Thinking � Econ Alive Chapter 1 section 3

What is an Economic Enigma? � An economic enigma is a puzzle � Something

What is an Economic Enigma? � An economic enigma is a puzzle � Something that can be solved using the 7 principles of economic thinking � One of my former students called it a contradiction. Looks like one thing turns out to be the opposite.

# 1 Scarcity forces trade-offs � Because we cannot get all of the stuff

# 1 Scarcity forces trade-offs � Because we cannot get all of the stuff we need or want, we must choose between that which we get and that which we must give up. � Like when selecting that most important of devices the cell phone. Android or iphone?

# 2 Cost Versus Benefit � What will it cost me to select this

# 2 Cost Versus Benefit � What will it cost me to select this particular item? � What will I get in return for my Money or time? Cell phone perhaps + data and other costs Will the reward outweigh the financial outlay?

# 3 Thinking at the Margin (another one) � Marginal Costexpenditure for one additional

# 3 Thinking at the Margin (another one) � Marginal Costexpenditure for one additional item like shoes or pieces of pizza. � Marginal Benefit� What do I actually receive when paying for that additional item? Will getting one more for the price be worth it? Maybe I shouldn’t have eaten that 15 th piece

# 4 Incentives Matter � People respond in predictable ways to what Economists call

# 4 Incentives Matter � People respond in predictable ways to what Economists call incentives. � If you want more people to come to your store… � Or to buy more stuff… � Offer a reward for finding someone and more people begin looking. America’s Most Wanted Then have a sale Quid Pro Quo Black Friday following Thanksgiving

# 5 Trade Makes People Better Off � Do you do everything for yourself?

# 5 Trade Makes People Better Off � Do you do everything for yourself? � Make your own clothes? Farm your own crops? � Of course not. Why not? TMPBO that’s why!

# 6 Markets Coordinate Trade � If you build it… and electronic make all

# 6 Markets Coordinate Trade � If you build it… and electronic make all of that easier � They will come… � Ebay � Amazon Don’t forget malls and outlet malls As well as facebook, twitter, as advertising tools . Com also has taken the world by storm

# 7 Future Consequences Count � Like Playing checkers, there is more to consider

# 7 Future Consequences Count � Like Playing checkers, there is more to consider than just if you can jump or not… � Perhaps your move will lead your opponent to an even better move… � Or Think about what COULD result lure him into a trap! What’s best in the long run?

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