The Big Ideas in Economics

ECON 101H: Introduction to Economics

Sérgio O. Parreiras

Economics Department, UNC at Chapel Hill

Spring 2026

The Big Ideas in Economics

One: Incentives Matter

The Big Ideas in Economics

Two: Good Institutions Align Self-Interest with the Social Interest

"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."
— Adam Smith, 1776

The Big Ideas in Economics

Three: Trade-offs Are Everywhere

Definition: Sunk cost
A cost that is irreversible.
Definition: Opportunity cost
The opportunity cost of a given choice is the value of the highest alternative choice.

Scarcity

Scarcity

Economics

Dictionary definition
The branch of knowledge concerned with the production, consumption, and transfer of wealth.

"Economists view the individual as the unit of agency and investigate the interaction of the purposeful behaviors of different individuals within various economic institutions. The purpose of economics is to analyze institutions, such as trading mechanisms and organization structures, and to ask how those institutions mediate the interests of different economic agents." — Faruk Gul and Wolfgang Pesendorfer (2005).

Our definition
The study of individuals' choices in the presence of trade-offs generated by scarcity.

"Economics is not about the intersection of supply and demand curves, and about what direction prices move if a curve 'shifts.' It is a quantitative theory of human behavior both individually and in interaction with other people." — David Levine (2012).

The Big Ideas in Economics

Four: Think On The Margin

"It is only then because land is of different qualities with respect to its productive powers, and because in the progress of population, land of an inferior quality, or less advantageously situated, is called into cultivation, that rent is ever paid for the use of it. When, in the progress of society, land of the second degree of fertility is taken into cultivation, rent immediately commences on that of the first quality, and the amount of that rent will depend on the difference in the quality of these two portions of land."

— David Ricardo (1817): Principles of Political Economy and Taxation

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Marginal Analysis

We will consider three different ways of looking at the behavior of a function $f$ at some point $x_0$. We shall refer to $\dfrac{d}{dx}f(x_0)$ as the:

  1. derivative of $f$ at $x_0$ (analytical view).
  2. slope of $f$ at $x_0$ (geometric view).
  3. marginal value of $f$ at $x_0$ (economic view).

The Big Ideas in Economics

Five: Trade Makes People Better Off

"Trump's steel tariffs cost U.S. consumers $900,000 for every job created, experts say." — Washington Post (May 7, 2019)

The Big Ideas in Economics

Six: Wealth and Economic Growth Are Important

The Big Ideas in Economics

Seven: Institutions Matter

Korean Peninsula from space, NASA 2014

The Big Ideas in Economics

Eight: Economic Booms and Busts Cannot Be Avoided but Can Be Moderated

"This time is different." — Reinhart and Rogoff (2009).

The Big Ideas in Economics

Nine: Inflation Is Caused by Increases in the Supply of Money

Is it?

The Big Ideas in Economics

Ten: Central Banking Is a Hard Job