The importance of thinking on the margin did not become commonplace in economics until 1871, when marginal thinking was simultaneously described by three economists: William Stanley Jevons, Carl Menger, and Leon Walras. Economists refer to the “marginal revolution” to explain this transformation in economic thought.

Big Idea One: Incentives Matter

Amazingly, the inflation rate in Zimbabwe kept rising. In January of 2008, the government had to issue a 10-million-dollar bank note (worth about 4 U.S. dollars), and a year later they announced a 20-trillion-dollar note that bought about what 10 million dollars had a year earlier. In early 2009, the inflation rate leaped to billions of percent per

The inevitability of trade-offs is the consequence of a big fact about the world, scarcity. We face trade-offs because we don’t have enough resources to satisfy all of our wants—more of this means less of that. The great economic problem is how to arrange our scarce resources to satisfy as many of our wants as possible.

Incentives are rewards and penalties that motivate behavior.

The elasticity of supply is a measure of how responsive the quantity supplied is to a change in price. It is computed by

Oil, however, is not equally valuable in all of its uses. Oil is more valuable for producing gasoline and jet fuel than it is for producing heating or rubber duckies. Oil is very valuable for transportation because in that use oil has few substitutes.

Trade creates value by moving goods from people who value them less to people who value them more.

complements If two goods are complements a decrease in the price of one good leads to an increase in the demand for the other good.