The Economics Book: Big Ideas Simply Explained

The purpose of studying economics is …to learn how to avoid being deceived by economists.

Economic things matter only in so far as they make people happier." Andrew Oswald British economist (1953–)

The poorer the household, the larger the proportion of its budget dedicated to nourishment.

Ludwig von Mises argues that socialism cannot work because prices are the only way to establish need.

let the sum total of the revenues be annually returned into and along the entire course of circulation." - François Quesnay

Turning to capital, Smith said that the amount of profit that capital can expect to earn through investments is roughly equal to the rate of interest. This is because employers compete with each other to borrow funds to invest in profitable opportunities. Over time the rate of profit in any particular field falls as capital accumulates and opportunities for profit are exhausted.

In boom times companies have high profits. They increase production to satisfy demand for goods. This leads to excess supply. Companies cut prices to compete for customers. leading to lower profits, lay-offs, and economic depression. Eventually lower prices lead to an increase in demand and profits go back up. The economy is a yo-yo.