chapter 1

  1. incentives
    rewards and penalties that motivate behavior

    ( entrepreneur who risked his or her capital to build the supermarket—each of these people acted in their own interest, but in so doing they also acted in your interest.)
  2. invisible hand
    the self-regulating nature of the marketplace

    (metaphor used by Adam Smith)

    as created by the conjunction of the forces of self-interest, competition, and supply and demand, which he noted as being capable of allocating resources in society


    Throughout this book, we emphasize ways in which individuals acting in their self-interest produce outcomes that were not part of their intention nor design, but which nevertheless have desirable properties
  3. pharmaceuticals
    a medicinal drug
  4. opportunity cost
    of a choice is the value of the opportunities lost

    ex: attending college vs. fulltime job
  5. inflation
    an increase in the general level of prices.

    Inflation makes people feel poorer but, perhaps more important, rising and especially volatile prices make it harder for people to figure out the real values of goods, services, and investments. For these and other reasons, most people (and economists) dislike inflation.
Card Set
chapter 1