Ten Principles of Economics:

1.2.1 How People Make Decisions:

• People face tradeoffs.
• The cost of something is what you give up getting it.
• Rational people think at the margin.
• People respond to incentives.

 1.2.2 How People Interact:

• Trade can make everyone better off.
• Markets are usually a good way to organize economic activity.
• Governments can sometimes improve economic outcomes.

1.2.3 How the Economy as a Whole Works:

• The standard of living depends on a country’s production.
• Prices rise when the government prints too much money.
• Society faces a short-run tradeoff between inflation and unemployment.

(Source: Gregory N. Mankiw)

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What is Economics?

 

Economy...

...The word "economy" is derived from a Greek word meaning "home manager."

1.1.1 A household and an economy face many decisions:

• Who will work?
• What goods and how many of them should be produced?
• What resources should be used in production?
• At what price should the goods be sold?

1.1.2 Society and Scarce Resources:

The management of society’s resources is important because resources are scarce.

1.1.3 Scarcity...

...indicates that society has limited resources and, as a result, cannot produce all of the goods and services that people desire.

1.1.4 The subject of economics focuses on how society allocates its limited resources.

1.1.5 Economists study...

• How people make decisions.
• How people interact with each other.
• The forces and trends that affect the economy as a whole.

(Source: Gregory N. Mankiw)

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