The Guide To Economic
Thinking
People Choose.
Most situations involve making choices. People
evaluate the costs and benefits of different
alternatives and choose the alternative that seems
best to them.
People's Choices Involve Costs.
Costs do not necessarily involve money. The most
important type of cost is opportunity cost: the next
best alternative that people give up when they make
a choice.
People Respond to Incentives in
Predictable Ways.
How people cooperate is governed by written and
unwritten rules. As the rules change, incentives – and
consequently peoples behaviors – change.
People Gain When They Trade
Voluntarily.
People can produce goods and services at lower
opportunity costs when they specialize in what they
do best. Then they can trade what they produce for
goods or services that would be more costly for them
to produce. In this way, both sides gain.
People’s Choices Have
Consequences That Lie in the
Future.
The important costs and benefits in economic decision
making are those that will appear in the future. The
study of economics stresses the importance of making
decisions about the future because we can influence
only the future; we cannot influence things that
happened in the past
Why Adults Are Paid Big Bucks
To Play Games
The Mystery
• Many professional athletes never finish college. Some go
directly into professional sports from high school. Yet
professional athletes are frequently paid salaries totaling
millions of dollars a year. Annual salaries for professional
football players range from a few hundred thousand dollars to
several million dollars. The story is much the same among
professional athletes in basketball and baseball.
• Yet other people who perform worthy services – nurses, police
officers, firefighters and teachers – receive salaries far short of
the amounts paid to professional athletes. What is wrong with
our values?
• Why are grown men and women paid salaries totaling millions
of dollars to play games?
Mystery Clues
1. In addition to salaries from playing games,
athletes often earn money through
endorsements, speaking engagements,
signing autographs and other nongame
activates.
2. Few people possess the skills required to
throw big – league fast balls, deliver one –
handed jams and toss game – winning
touchdown passes.
3. Many professional athletes have gone to
college.
4. Coaches encourage competition among
their players as a way to bring out their best
performance
5. Fans will pay to see professional athletes
perform in person; they also tune in by the
millions to watch athletes on television.
6. When professional players strike, this is a
turn – off for many fans.
7. Like police officers and firefighters,
professional athletes risk serious injury.
8. The non labor costs of running a team
such as uniforms, equipment and airfares
have been increasing recently.
9. Famous athletes regularly appear on the
covers of popular magazines.
10. Some athletes return to college and
complete their education after they retire
from sports.
The Guide to Economic Thinking
•
•
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People choose.
People’s choices involve costs.
People respond to incentives in predictable ways.
People create economic systems that influence individual
choices and incentives.
• People gain when they trade voluntarily.
• People’s choices have consequences that lie in the future.
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The Guide To Economic Thinking