Ten Key Elements of Economics

In the book, Common Sense Economics, the author describes the ten key elements of economics. The key that I consider is the most important is “No Such Thing as a Free Lunch”. This element states that it is impossible to get something for nothing. Whatever goods and services are provided must constantly be funded for by someone. In other words, not every price is a monetary price. For example, a city council chooses to build a new school. By doing so, the cost of the new school necessitates sacrificing building other things such as a mall or water park. Essentially, you must give up the next best alternative to do something else.

The next key element I believe is important is, “Incentives Matter”. An incentive is a cost or benefit that motivates the choice of a person. Incentives are the core reason we do things. If incentives are altered, behavior is altered. When prices of goods are higher consumers have the incentive to purchase less of it and sellers have the incentive to sell more of it. Prices are very powerful incentives. For example, when gas prices rise, consumers buy a reduced amount of gasoline. They do not stop buying gasoline, but instead find ways to use less. A way they do this is by buying more fuel efficient cars. Then when you have a more fuel efficient car you drive more which in return causes you to buy more gas than before. This element relates to “No Such Thing as a Free Lunch” in the way of how you can believe you are saving money when in reality you are costing more.

Another vital element is, “People Earn Income by Helping Others”. Due to having different interests, we all branch of into diverse careers. These dissimilarities influence income because they influence the value of the different goods and services individuals are able or willing to provide to others. A doctor’s job is to help a person maintain their overall wellbeing. While performing a service to help to heal someone they are also making money off of the person...