Book Review: Common Sense Economics The book, Common Sense Economics written by James D. Gwartney, Ricahrd L.Stroup, Dwight R. Lee, and Tawni Ferrarini, gives a simple insight for reader into the inner workings economics in a common sense terms. The main point of the book is that to have economic success comes from low interference from the government, the motivation of individuals, and competitive markets. In the beginning of the book, the authors of the book started to breakdown this message of economics by explaining to the readers the twelve key elements of economics. 1. Incentives matters 2. There is no such thing as free lunch 3. Decisions are made at the margin 4. …show more content…
This similar to a business owner who expanding their business, they have to factor in the cost of expanding and the potential profit.
The fourth concept is “Trade promotes economic progress.” The authors of the explain that trade is based on the principle of the personal gain on both sides. This means through trade both sides benefit from trade. They explain that through trade it takes product or service that may not be valuable in that area and bring to a place that it is valuable. This allows both sides to benefit, one side is getting a good or service that they don’t have and another side get to make profit on something that may not be to value in that area.
The next concept goes in hand with the last concept, “Transaction Cost is an obstacle to trade”. It is explained as the cost of trade. This can be seen as the resources used to help bring about trade. If the cost of trade is high, it can a lot of time hinder the benefits of the trade. An example of this transaction cost is the cost of the middleman. With this concept the authors explain how involving a middleman is necessary in trade, but can add an expanse of trade. This expense is often added on to the price of the product being traded. This can also hinder or detour an individuals from buying this item.
The sixth concept in the book touches on the subject of prices. It is called