The Economy 2.0 — Microeconomics

Take a closer look at the units of the microeconomics volume of The Economy 2.0: what they’re about, what models they present, how they’re changing compared with The Economy 1.0.


Unit 2 — Technology and incentives


Unit 2 uses economic models to help explain the data presented in Unit 1, emphasizing principles of economic modelling (such as simplification, causal mechanisms, and ceteris paribus) and introduces the concepts of opportunity costs, rents, and incentives to illustrate how people make economic decisions.



Two simple economic models are introduced, which help explain major changes that have taken place around the world since the Industrial Revolution, such as rapid increases in living standards in various countries, the adoption of new technologies, and increasing global temperatures. In particular, a model of specialization and comparative advantage highlights the role of international trade, and a model using isocost lines and relative prices is used to explain shifts toward new technologies.


Major changes

A reorganization of material between Units 1 and 2 (e.g. comparative advantage is now taught in Unit 2, after opportunity cost has been introduced). Consistent with the new Unit 1, there is greater emphasis on climate change and the role of colonialism and slavery in the global industrial revolution.


The header

This is the header we’ve chosen for Unit 2.

It shows the production of made-to-measure suits at the KuteSmart firm in Shandong, China. It’s a visual representation of technological progress, a central theme in this unit.

← See how Unit 1 is changing See how Unit 3 is changing →