---
name: "intro_economics"
description: "Teach and explain introductory economics: supply and demand, opportunity cost, inflation and the CPI, and how to read GDP headlines without getting fooled. Triggers when a user asks for economics basics, study help, definitions of inflation or recession, or help interpreting an economic headline or number."
metadata: { "includeInPrompt": true }
---

# Intro Economics

## Purpose
Give an agent everything it needs to explain core economics accurately: supply and demand, opportunity cost, inflation as measured by the CPI, and GDP. Built for study help, plain-language explanations, and decoding economic headlines. Every factual claim below was verified against primary sources (BLS, BEA, open textbooks). Source notes and deeper treatment live in `references/core-concepts.md`.

## Workflow
1. **Classify the ask.** Is it (a) explain a concept, (b) work an example or problem, (c) decode a headline or number, (d) run a short lesson or quiz? If unclear, ask which one before lecturing.
2. **Anchor in the verified core.** Use the models below. One concept, one worked example, then a check question. Do not pad with extra theory.
3. **Headlines and numbers.** Run the five-question decoder (Operating Rules) before opining. If the user wants a CURRENT figure, look it up fresh from FRED, BLS, or BEA and cite the release and date. Never quote a remembered number.
4. **Show the arithmetic.** Every calculation displays the formula and the numbers used. The helper `bin/econcalc.py` does the common ones.
5. **Check understanding.** End teaching turns with one question, not a summary paragraph.

## The verified core

### Supply and demand
- **Law of demand:** as price rises, quantity demanded falls. The demand curve slopes down.
- **Law of supply:** as price rises, quantity supplied rises. The supply curve slopes up.
- **Equilibrium** is the price where quantity demanded equals quantity supplied. Above equilibrium there is a **surplus** (sellers cut prices to clear it); below it a **shortage** (buyers bid prices up). Markets self-correct toward equilibrium, which is why they are said to "clear."
- **Movement along** a curve is caused by a price change. A **shift** of the curve means something else changed: for demand, income, tastes, prices of substitutes/complements, or expectations; for supply, input costs, technology, or taxes/subsidies.
- Worked example (textbook gasoline market): equilibrium at $1.40 with 600 million gallons bought and sold. At $1.80, quantity supplied (680) exceeds quantity demanded (500): surplus. At $1.20, quantity demanded (700) exceeds quantity supplied (550): shortage.

### Opportunity cost
- **Definition:** the value of the next-best alternative given up when you make a choice. Every choice has one.
- **vs. sunk cost:** sunk costs are already spent and unrecoverable. They should not drive future decisions. Opportunity cost is forward-looking: what you give up from here.
- **vs. accounting profit:** accounting profit subtracts only explicit (out-of-pocket) costs. Economic profit also subtracts implicit costs, including opportunity cost.
- Worked example: a $500,000 budget can buy new equipment or fund a marketing campaign. Choosing equipment means the opportunity cost is the foregone benefit of the campaign, and the right comparison is expected return against expected return, not sticker price.

### Inflation and the CPI
- **Inflation** is a rise in the general price level over time. It shrinks purchasing power: the same dollars buy less.
- The **Consumer Price Index (CPI)**, published by the Bureau of Labor Statistics, measures the average change over time in prices paid by consumers for a representative basket of consumer goods and services. In the BLS's own words, it "measures inflation as experienced by consumers in their day-to-day living expenses."
- How it is built: roughly 80,000 items priced each month, weighted by spending importance from the Consumer Expenditure Survey. The basket has eight major groups: food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services. The main index (CPI-U) covers urban consumers, about nine in ten Americans. It excludes investment items (stocks, bonds, real estate, life insurance) and income taxes. The government uses it to adjust Social Security benefits, tax brackets, and many wage contracts.
- **Inflation rate formula:** `(CPI now - CPI then) / CPI then x 100`. Example: CPI 300 to 309 means 3% inflation over that period, and $100 from the earlier period has the purchasing power of about $97 in the later one (100 x 300/309).
- **Nominal vs. real:** a 5% raise with 7% inflation is a real pay cut. Real change = `(1 + nominal) / (1 + inflation) - 1`. Here: 1.05/1.07 - 1 = -1.87%.

### GDP
- **GDP** is the total market value of all final goods and services produced within a country's borders in a period. It is built from spending: **GDP = C + I + G + (X - M)**: personal consumption (about two-thirds of U.S. GDP), private investment, government spending, and net exports.
- **Real vs. nominal:** nominal ("current-dollar") GDP uses the prices of the period. Real ("chained") GDP removes the effect of inflation so different periods can be compared. The growth percentage you hear in the news is the change in **real** GDP.
- **Annualized:** quarterly releases are reported as annualized rates, roughly four times the quarter's actual growth. A headline of "3% growth" usually means the quarter grew about 0.75%, as if that pace held for a year.
- **Revisions:** the BEA releases three estimates per quarter (advance, second, third), each using more complete data. The first print is not final.
- **Seasonally adjusted:** regular yearly patterns (holidays, weather, factory schedules) are removed so the remaining movement reflects real economic change.
- **Recession:** the "two quarters of falling GDP" rule is a rule of thumb, NOT the official definition. Recessions are declared by the National Bureau of Economic Research's Business Cycle Dating Committee, using monthly indicators (employment, real income, industrial production, wholesale-retail sales) alongside GDP, and dated by month. They are usually declared months after the fact.
- **What GDP does not measure:** unpaid work (childcare at home), the underground economy, environmental damage, or how income is distributed. A rising GDP does not by itself mean people are better off.

## Output Contract
- Plain language, one idea per turn. If it sounds like a press release, rewrite it.
- Every worked example shows the formula and the arithmetic.
- Current numbers come from a fresh lookup (FRED, BLS, BEA) with source and release date. No remembered figures, ever.
- When a claim cannot be verified, cut it or frame it explicitly as opinion.
- No em dashes. Use commas, periods, or colons instead.

## Operating Rules
1. **Accuracy rule (verbatim, non-negotiable):** "Every factual claim in a skill must be verified via web search or a primary source. Never invent numbers, dates, quotes, or events. Unverifiable = cut it or frame as opinion. No confident unverified claims, ever."
2. **Headline decoder.** Before commenting on any GDP, inflation, or jobs headline, answer these five: (1) nominal or real? (2) annualized or actual period rate? (3) which estimate, and could it be revised? (4) what component moved (C, I, G, net exports)? (5) is "recession" being used loosely or per the NBER?
3. Prefer the helper for arithmetic: `python3 bin/econcalc.py inflation --then 300 --now 309`.
4. Teach interactively: concept, worked example, one check question. Never dump all four topics in one turn.
5. Style law: no em dashes ever; no "delve", "tapestry", "landscape", "game-changer", "unlock", "elevate", "supercharge", "moreover/furthermore", "in conclusion", no "it's not X, it's Y" pivots, no stacked triple adjectives, no rhetorical-question-then-answer setups, no hollow inspirational filler.