Summary Principles of Economics and Business 1 - Part 1 2026/2027
Welcome to Slim Academy!
In front of you is the example summary for the course Principles of Economics and Business
1, taught in block 1 of the first year of the Business Administration Bachelor’s programme at the
University of Amsterdam. Students starting Business Administration or Economics and Business
Economics often find the first year challenging. But don't worry, we're here to help you succeed
in all your exams and earn your study credits with our summaries.
At Slim Academy, our goal is to help you study smarter. We do this by summarising the core of
the material clearly, simplifying complex topics, and offering the right tools to help you practise
actively. For the best preparation for your exam, we recommend using our full range of study
materials. For this course, the following products are available.
🎁 Tip: Use the code ABO-Sefa on SlimAcademy.nl and receive your First month for free with
a subscription!
Product Content Available
versions
Part 1 & Part 2 Part 1 covers the material from weeks 1–3, and Part 2 ✓ App
covers weeks 4–6. In the literature summary, you’ll find ✓ Print
the key concepts and theories explained clearly and
illustrated with examples.
Exercises summary For quantitative courses, a exercises booklet has been ✓ App
compiled containing sample questions, complete with ✓ Print
worked solutions and clear step-by-step explanations.
The content is based on previous exams, workshops,
and lectures, ensuring that it closely aligns with the
course material and level of difficulty.
Online Practice Questions that help you practise actively. They allow you ✓ App
Questions to check whether you have fully mastered the material
and understand what to expect on the exam.
Flashcards Flashcards to help you quickly review definitions, ✓ App
diagrams, and key concepts. They support active
learning and help you remember the material faster and
more effectively.
Contact
Do you have questions about our products, delivery, or anything else? Feel free to contact us at
+31 6 81 60 19 60 or email us at .
This summary is for personal use only and may not be copied or distributed. The text has been written according
to the author’s own interpretation and is intended as a study aid. Always consult the original sources.
1
, Summary Principles of Economics and Business 1 - Part 1 2026/2027
Digital and Print Updates
Note! In this sample summary, we have included the material from the first 2 weeks of the previous
academic year.
At Slim Academy, you receive a digital update of the summary every week. At the beginning of
the block, not all lectures have taken place yet, which is why we update the summary weekly as
soon as our authors have followed the newest course material. This way, the content remains
current, reliable, and of high quality. So you don’t have to wait until the end of the block: every
week a new part becomes available. In the overview below, you can see when which material is
digitally available.
Later in the block, we bundle all weekly updates into one clear, paper summary. Is new material
added after the shipping date? No worries! As soon as it appears, we summarise everything
quickly and send an update in the app.
Week Content
Week 1 Chapter 1: Big Ideas in Economics
Chapter 2: The Power of Trade and Comparative Advantage
Adam Smith (1776), Wealth of Nations, Strahan & Cadell, London, Book I, Chapters
I, II, III
Week 2 Chapter 3: Supply and Demand
Chapter 4: Equilibrium
Friedrich A. von Hayek (1945), “The Use of Knowledge in Society,” American
Economic Review
Week 3 Chapter 11: Costs and Profit Maximization Under Competition
Chapter 14: Price Discrimination and Pricing Strategy
Ronald H. Coase (1937), “The Nature of the Firm,” Economica;
We wish you the best of luck with your studies and your exams!
Team Slim Academy
2
, Summary Principles of Economics and Business 1 - Part 1 2026/2027
Table of Contents
Welcome to Slim Academy! 1
Digital and Print Updates 2
Table of Contents 3
Week 1: Big Ideas – Introduction to the course 4
Chapter 1: Big Ideas in Economics 4
Chapter 2: The Power of Trade and Comparative Advantage 8
Adam Smith (1776): Wealth of Nations, Strahan & Cadell, London, Book I, Chapters I, II, III 13
Week 2: Choices 19
Chapter 3: Supply and Demand 19
Chapter 4: Equilibrium 30
Friedrich A. von Hayek (1945): “The Use of Knowledge in Society” 40
Practice questions and flashcards 46
3
, Summary Principles of Economics and Business 1 - Part 1 2026/2027
Week 1: Big Ideas – Introduction to the course
Chapter 1: Big Ideas in Economics
Introduction
One of the crucial principles in economics is that incentives matter as they can motivate
behaviour. This chapter explores fundamental economic concepts and emphasises the
importance of incentives and other key ideas that shape economic understanding. Below are
described some of the key ideas held in economics.
Incentives matter
This idea describes that incentives are everywhere and have a pervasive role in our world. Think
of incentives as rewards or penalties that motivate human behaviour.
Adam Smith noted in “The Wealth of Nations” that people often act out of self-interest, which can
lead to positive outcomes.
Today, many economists realise that people respond predictably to various incentives (e.g.,fame,
power, and reputation) due to their acting out of self-interest. Even charitable donations are
influenced by incentives, such as public recognition.
To illustrate, sea captains transporting convicts to Australia had incentives to mistreat prisoners.
When their payment system changed to reward captains for prisoners who survived the journey,
their behaviour changed, as they now had financial incentives to ensure the prisoners' survival.
Good institutions align self-interest and social interest
Aligning self-interest with the broader public interest results in positive outcomes (as
mentioned above - paying captains for prisoners who survived led to better treatment).
However, misalignment between self and social interest can lead to extremely negative
outcomes.
Adam Smith’s “Invisible hand” metaphor captures this topic by saying that if markets are working
well, people who want to pursue their own interests also help pursuing social good (think of
well-stocked supermarkets where individuals’ self-interest actions benefit society).
However, markets can fail when incentives misalign, leading to issues like pollution or
overfishing. In such cases, government intervention can help realign incentives through taxes,
subsidies, or regulations.
Trade-offs are everywhere
This idea highlights the concept that every choice involves trade-offs due to scarcity.
One of the great economic problems is about trying to satisfy as many needs as possible while
considering and arranging the world’s scarce resources.
The Vioxx case illustrates this: while more testing for pharmaceuticals can lead to safer drugs, it
also results in delays (drug lag) and higher costs (drug loss), preventing beneficial drugs from
reaching the market sooner and reducing the number of new drugs developed.
A closely related topic, opportunity cost is the value of the next best alternative lost when
making a choice (e.g., by attending university, one forgoes the income by not working).
Overall, recognizing trade-offs and opportunity costs is essential for making wise economic
decisions and understanding behaviour.
Thinking of the margin
This idea explains the concept of making decisions based on marginal benefits and costs,
meaning small incremental adjustments. Most decisions in real life involve marginal choices,
which can help understand consumer and producer behaviour
4
Welcome to Slim Academy!
In front of you is the example summary for the course Principles of Economics and Business
1, taught in block 1 of the first year of the Business Administration Bachelor’s programme at the
University of Amsterdam. Students starting Business Administration or Economics and Business
Economics often find the first year challenging. But don't worry, we're here to help you succeed
in all your exams and earn your study credits with our summaries.
At Slim Academy, our goal is to help you study smarter. We do this by summarising the core of
the material clearly, simplifying complex topics, and offering the right tools to help you practise
actively. For the best preparation for your exam, we recommend using our full range of study
materials. For this course, the following products are available.
🎁 Tip: Use the code ABO-Sefa on SlimAcademy.nl and receive your First month for free with
a subscription!
Product Content Available
versions
Part 1 & Part 2 Part 1 covers the material from weeks 1–3, and Part 2 ✓ App
covers weeks 4–6. In the literature summary, you’ll find ✓ Print
the key concepts and theories explained clearly and
illustrated with examples.
Exercises summary For quantitative courses, a exercises booklet has been ✓ App
compiled containing sample questions, complete with ✓ Print
worked solutions and clear step-by-step explanations.
The content is based on previous exams, workshops,
and lectures, ensuring that it closely aligns with the
course material and level of difficulty.
Online Practice Questions that help you practise actively. They allow you ✓ App
Questions to check whether you have fully mastered the material
and understand what to expect on the exam.
Flashcards Flashcards to help you quickly review definitions, ✓ App
diagrams, and key concepts. They support active
learning and help you remember the material faster and
more effectively.
Contact
Do you have questions about our products, delivery, or anything else? Feel free to contact us at
+31 6 81 60 19 60 or email us at .
This summary is for personal use only and may not be copied or distributed. The text has been written according
to the author’s own interpretation and is intended as a study aid. Always consult the original sources.
1
, Summary Principles of Economics and Business 1 - Part 1 2026/2027
Digital and Print Updates
Note! In this sample summary, we have included the material from the first 2 weeks of the previous
academic year.
At Slim Academy, you receive a digital update of the summary every week. At the beginning of
the block, not all lectures have taken place yet, which is why we update the summary weekly as
soon as our authors have followed the newest course material. This way, the content remains
current, reliable, and of high quality. So you don’t have to wait until the end of the block: every
week a new part becomes available. In the overview below, you can see when which material is
digitally available.
Later in the block, we bundle all weekly updates into one clear, paper summary. Is new material
added after the shipping date? No worries! As soon as it appears, we summarise everything
quickly and send an update in the app.
Week Content
Week 1 Chapter 1: Big Ideas in Economics
Chapter 2: The Power of Trade and Comparative Advantage
Adam Smith (1776), Wealth of Nations, Strahan & Cadell, London, Book I, Chapters
I, II, III
Week 2 Chapter 3: Supply and Demand
Chapter 4: Equilibrium
Friedrich A. von Hayek (1945), “The Use of Knowledge in Society,” American
Economic Review
Week 3 Chapter 11: Costs and Profit Maximization Under Competition
Chapter 14: Price Discrimination and Pricing Strategy
Ronald H. Coase (1937), “The Nature of the Firm,” Economica;
We wish you the best of luck with your studies and your exams!
Team Slim Academy
2
, Summary Principles of Economics and Business 1 - Part 1 2026/2027
Table of Contents
Welcome to Slim Academy! 1
Digital and Print Updates 2
Table of Contents 3
Week 1: Big Ideas – Introduction to the course 4
Chapter 1: Big Ideas in Economics 4
Chapter 2: The Power of Trade and Comparative Advantage 8
Adam Smith (1776): Wealth of Nations, Strahan & Cadell, London, Book I, Chapters I, II, III 13
Week 2: Choices 19
Chapter 3: Supply and Demand 19
Chapter 4: Equilibrium 30
Friedrich A. von Hayek (1945): “The Use of Knowledge in Society” 40
Practice questions and flashcards 46
3
, Summary Principles of Economics and Business 1 - Part 1 2026/2027
Week 1: Big Ideas – Introduction to the course
Chapter 1: Big Ideas in Economics
Introduction
One of the crucial principles in economics is that incentives matter as they can motivate
behaviour. This chapter explores fundamental economic concepts and emphasises the
importance of incentives and other key ideas that shape economic understanding. Below are
described some of the key ideas held in economics.
Incentives matter
This idea describes that incentives are everywhere and have a pervasive role in our world. Think
of incentives as rewards or penalties that motivate human behaviour.
Adam Smith noted in “The Wealth of Nations” that people often act out of self-interest, which can
lead to positive outcomes.
Today, many economists realise that people respond predictably to various incentives (e.g.,fame,
power, and reputation) due to their acting out of self-interest. Even charitable donations are
influenced by incentives, such as public recognition.
To illustrate, sea captains transporting convicts to Australia had incentives to mistreat prisoners.
When their payment system changed to reward captains for prisoners who survived the journey,
their behaviour changed, as they now had financial incentives to ensure the prisoners' survival.
Good institutions align self-interest and social interest
Aligning self-interest with the broader public interest results in positive outcomes (as
mentioned above - paying captains for prisoners who survived led to better treatment).
However, misalignment between self and social interest can lead to extremely negative
outcomes.
Adam Smith’s “Invisible hand” metaphor captures this topic by saying that if markets are working
well, people who want to pursue their own interests also help pursuing social good (think of
well-stocked supermarkets where individuals’ self-interest actions benefit society).
However, markets can fail when incentives misalign, leading to issues like pollution or
overfishing. In such cases, government intervention can help realign incentives through taxes,
subsidies, or regulations.
Trade-offs are everywhere
This idea highlights the concept that every choice involves trade-offs due to scarcity.
One of the great economic problems is about trying to satisfy as many needs as possible while
considering and arranging the world’s scarce resources.
The Vioxx case illustrates this: while more testing for pharmaceuticals can lead to safer drugs, it
also results in delays (drug lag) and higher costs (drug loss), preventing beneficial drugs from
reaching the market sooner and reducing the number of new drugs developed.
A closely related topic, opportunity cost is the value of the next best alternative lost when
making a choice (e.g., by attending university, one forgoes the income by not working).
Overall, recognizing trade-offs and opportunity costs is essential for making wise economic
decisions and understanding behaviour.
Thinking of the margin
This idea explains the concept of making decisions based on marginal benefits and costs,
meaning small incremental adjustments. Most decisions in real life involve marginal choices,
which can help understand consumer and producer behaviour
4
