3311 (1) - Chapter Ten Principles of Economics 1 Ten Pr...

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Unformatted text preview: Chapter Ten Principles of Economics 1 Ten Pr inciples of Economics Economy oikonomos (Greek) One who manages a household Household - many decisions Allocate scarce resources Ability, effor t, and desire Society - many decisions Allocate resources Allocate output Resources are scarce 2 Ten Pr inciples of Economics Scarcity - limited nature of societys resources Economics Study of how society manages its scarce resources Economists study: How people make decisions How people int eract with one another Analyze forces and trends that affect the economy as a whole 3 How People Make Decisions Pr inciple 1: People face trade-offs Making decisions Trade off one goal against another Student time Parents income Society National defense vs. consumer goods Clean environment vs. high level of income Efficiency vs. equality 4 How People Make Decisions Pr inciple 1: People face trade-offs Efficiency Society - maximum benefits from its scarce resources Size of the economic pie Equality Benefits - unifor mly distr ibuted among societys members How the pie is divided int o individual slices 5 How People Make Decisions Pr inciple 2: The cost of something is what you give up to get it People face trade-offs Make decisions Compare cost with benefits of alt er natives Oppor tunity cost What ever most be given up to obtain one item 6 How People Make Decisions Pr inciple 3: Rational people think at the margin Rational people Systematically & pur posefully do the best they can t o achieve their objectives...
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This note was uploaded on 07/06/2010 for the course CHEMICAL 89689 taught by Professor Lkg during the Spring '10 term at Boise State.

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3311 (1) - Chapter Ten Principles of Economics 1 Ten Pr...

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