This workbo

2. INCENTIVES
The Big Idea and
the Seven Secrets
for Thinking Like an
Economist
Student Workbook

3. THE SCARCITY CONDITION
• Scarcity
• What is Economics?

4. INCENTIVES
The Big Idea
• _______ and ________ incentives:
– Grades
• _______ and _______ incentives:
– Unintended consequences
• Incentives and _________
• Incentives are everywhere

5. 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

6. The Seven Secrets:
Opportunity Cost
• What is Opportunity Cost?

7. The Seven Secrets:
Marginal Thinking
• What is marginal thinking?

8. The Seven Secrets:
Trade Creates Value
• Trade and __________ __________

9. 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

10. The Seven Secrets:
…But Markets Sometimes
Need a Hand
• Market _______
• Poorly defined _______ _______
• _______
• _______ _______
• _______ _______

11. The Seven Secrets:
Our Decisions Have Consequences
Now and in the Future
• _______ and _______ goods.
• The _______ _______

12. The Seven Secrets:
There are No Free Lunches
• “Free” is a four-letter word!
– Who is paying?