Learning Objectives

After reading this chapter, you should be able to

2.1 Define and explain the concept of opportunity cost.

2.2 Explain the importance of marginal thinking in economics.

2.3 Discuss why people respond predictably to changes in incentives.

2.4 Describe why specialization and trade are so important to economic growth.

2.5 Explain how markets can improve economic efficiency.

2.6 Describe how government policies can improve economic outcomes.

2.7 Explain how government policies may stabilize the economy.

2.8 Discuss how increasing productivity leads to higher economic growth.