Principles of Economics

A country has a fixed amount of money in its budget and must decide whether to spend more on healthcare or infrastructure. What principle is being illustrated here?

• Trade makes people better off

• Markets coordinate trade

• Scarcity forces trade-offs

• Future consequences count

Lisa trades her lunch sandwich for her friend’s pasta because she prefers it. This exchange shows which economic principle?

• Trade makes people better off

• Markets coordinate trade

• Incentives matter

• Costs versus benefits

A government is deciding whether to invest in a new dam project that will provide water but displace several communities. This decision primarily involves weighing:

• Future consequences count

• Costs versus benefits

• Trade makes people better off

• Markets coordinate trade

f Emily decides to study for one more hour to try and improve her grade from a B to an A-, which economic principle is she applying?

• Costs versus benefits

• Thinking at the margin

• Scarcity forces trade-offs

• Incentives matter

When a country considers increasing its national defense budget by just 1% to enhance security, it is primarily applying:

• Future consequences count

• Trade makes people better off

• • Thinking at the margin

• Incentives matter

A government offers tax breaks to companies that invest in renewable energy. This economic strategy demonstrates the principle of:

• Markets coordinate trade

• Incentives matter

• Future consequences count

• • Trade makes people better off

Sarah has $20 to spend on her weekend entertainment. She can either go to a movie and have popcorn or save some of that money for a new book. What economic principle does this illustrate?

• Thinking at the margin

• Scarcity forces trade-offs

• Incentives matter

• Costs versus benefits

A country’s stock market matches buyers with sellers to set prices for shares of the companies, effectively illustrating:

• Future consequences count

• Costs versus benefits

• Trade makes people better off

• Markets coordinate trade

Tom chooses to work extra hours because his employer is offering double pay for overtime. This situation best illustrates which principle?

• Incentives matter

• Costs versus benefits

• Scarcity forces trade-offs

• Thinking at the margin

Two countries enter a free trade agreement to eliminate taxes on each other's goods. This action is guided by which principle?

• Future consequences count

• Trade makes people better off

• Thinking at the margin

• Incentives matter