SEVEN PRINCIPLES OF ECONOMICS

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SEVEN PRINCIPLES OF ECONOMICS

• Chapter 1

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ECONOMY

• From the Greek for one who manages a household.
• (from Greek oikonomia household management,
  based on oikos house nemein manage.)
• Key concept scarcity.

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Definition

• Economics the study of how society manages its
  scarce resources.
• Scarcity - The problem of having unlimited
  wants but limited resources.

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Two focuses to studying Economics

• Microeconomics the study of the economic
  decisions and actions of individual people,
  companies, etc.
• Macroeconomics - a study of economics in terms of
  whole systems especially with reference to
  general levels of output and income and to the
  interrelations among sectors of the economy

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1. People face trade-offs.
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2. The cost of something is what you give up to
get it.
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3. Rational people think at the margin.
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4. People respond to incentives.
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5. Trade can make everyone better off.
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6. Markets are usually a good way to organize
economic activity.
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7. Future consequences count.