ch1 - 1. Ten Principles of Economics scarcity- the limited...

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1. Ten Principles of Economics 22/08/2007 20:51:00 scarcity- the limited nature of society’s resources economics- the study of how society manages its scarce resources How people make decisions 1. People face trade-offs efficiency- society is getting the max benefits from its scarce resources; size equity- benefits are distributed fairly among society’s members; how divided ex. taxes reduce efficiency and increase equity by having welfare programs 2. The cost of something is what you give up to get it opportunity cost- whatever must be given up to obtain some item 3. Rational people think at the margin rational people systematically and purposefully do the best they can to achieve their objectives, given the opportunities they have ex. firms decide how many workers to hire to achieve max profits marginal changes- small incremental adjustments to an existing plan ex. average cost of flying = 500, marginal cost = bag of peanut
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ch1 - 1. Ten Principles of Economics scarcity- the limited...

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