1. What do you think this book is about? How does it relate to Economics? Answer on pg. 12

2. Scarcity forces tradeoffs: limited resources force people to make choices and face tradeoffs when they choose. Example: When you have a glass of water, what can you do with it? drink it, water a plant with it, wash your hair with it Once you use it for one of those functions, you can’t use it for any of the others

3. Cost versus benefits: People choose something when the benefits of doing so are greater than the costs. Example: Some people choose to eat their vegetables even though they don’t like them because they know it makes them more healthy. The cost of eating something they don’t like is less than the benefit of being healthy.

4. Thinking at the margin: Most of the decisions made each day involve choices about a little more or a little less of something. Example: People tend to want their car to be clean, but they don’t wash their car every day. Is it worth the time to wash your car every day?

5. Incentives matter: People respond to incentives in generally predictable ways. Example: Many students choose to do their homework because we give them the incentive of getting a good grade, which could help them get into college, which could help them get a good job.

6. Trade makes people better off: By focusing on what we do well and then trading with others, we will end up with more and better choices than by trying to do everything for ourselves. Example: I choose to be a teacher. I provide that service to the community and get paid by your parents (through taxes) to do it. In return, I take that money and pay other people for their services – the grocery store clerk, the cable guy, the bartender.

7. Markets coordinate trade: Markets usually do better than anyone or anything else at coordinating exchanges between buyers and sellers. Example: As more and more people want to buy hybrid cars, car companies make more hybrid cars to sell them. We don’t force them to do this, but they want to sell cars and we want to buy them.

8. Future consequences count: Decisions made today have future (and often unintended) consequences. Example: Lots of students choose to have a job while they are in school so they can have some extra money. However, when they work and spend time studying, many students find that they have no time to spend the money.