- Reference: Dan Ariely experiment - Social Security Number as an anchor for the value of a bottle of wine
- Insight: Anchoring undermines the belief that market prices are based on supply and demand
50 Economics Ideas You Really Need to Know
by Edmund Conway
Published date: 2009
Category: Reference
Index Topics & Notes
- Example: Small farm or factory - with each new labour input there will come a time where each added worker causes less output than the last.
- Definition: Missed opportunities, as a result of decision making.
- Insight: More rational decisions are made when we are more informed about exactly what we are giving up.
- Insight: Time is money.
- Reference: 'The cost of something is what you give up to get it.' - Greg Mankiw, Harvard economics professor
- Reference: Famous economics principle: 'There's no such thing as a free lunch'.
- Definition: Occurs when people abuse a resource because they do not own it.
- Reference: Adam Smith - recognised that there were circumstances when the invisible hand would not work, including the Tragedy of the Commons.
- Insight: Poor or insufficient property rights can damage an economy - ownership encourages people to invest in and safeguard the value of their property.
- Insight: Where there is a limited resource, those exploiting it will do so to the detriment of their neighbours.