Chapter 1 - First Principles: Summary
1.
All economic analysis is based on a short list of basic principles. These principles apply to two levels of economic
understanding. First, we must understand how individuals make choices; second, we must understand how these
choices interact.
2.
Everyone has to make choices about what to do and what
not
to do.
Individual choice
is the basis of economics—if
it doesn't involve choice, it isn't economics.
3.
The reason choices must be made is that
resources
— anything that can be used to produce something else—are
scarce
. Individuals are limited in their choices by money and time; economies are limited by their supplies of human
and natural resources.
4.
Because you must choose among limited alternatives, the true cost of anything is what you must give up to get it—
all costs are
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- Summer '07
- -
- else—are scarce. Individuals, good at. Economies, economic understanding., Interaction—my choices, marginal decisions
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