1. Adam Smith- expressed the first economic ideas- An inquiry into the Nature and Causes of the Wealth of Nations Pg 3
2. Scarcity is when there is less of a good or resource freely available from nature than people would like.
3. Choice- selecting among alternatives
4. Resources- ingredients that people use to produces goods and services. Human resources, physical resources, and natural resources Pg. 4
5. Thomas Sowell
6. Objective- describes a factual situation in which the limited nature of resources keeps us from being able to completely fulfill our desires for good and services
7. Subjective- a personal opinion of whether someone meets an arbitrarily defined level of income.
9. Economic Theory- from basic principles of human behavior Pg. 7
10. There are 8 principles that characterize the economic way of thinking.
a. The use of scare resources is costly, so decision-makers must make trade-offs. Opportunity cost
b. The individuals choose purposefully- they try to get the most from their limited resources. Economizing behavior- rational decision making. Evaluation as utility- satisfaction that is expected from the choice of a specific alternative.
c. Incentives matter- Changes in incentives influence human choices in a predictable way. Both monetary and nonmonetary incentives matter.
d. Individuals make decisions at the margin. Marginal decision making- involve the effects of net additions to or subtractions from current conditions.
e. Although information can help us make better choices, its acquisition is costly.
f. Beware of the…