TEN PRINCIPLES OF ECONOMICS

TEN PRINCIPLES OF ECONOMICS - Many decisions in life...

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TEN PRINCIPLES OF ECONOMICS A. How People Make Decisions Principle #1: People Face Tradeoffs Making decisions requires trading off one goal against another Recognizing that people face tradeoffs does not by itself tell us what decisions they will or should make. Nonetheless, acknowledging life’s tradeoffs is important because people are likely to make good decisions only if they understand the options that they have available Principle #2: The Cost of Something Is What You Give Up to Get It Because people face tradeoffs, making decisions requires comparing the costs and benefits of alternative courses of action Concept of Opportunity Cost – whatever is given up to obtain some item Principle #3: Rational People Think at the Margin
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Unformatted text preview: Many decisions in life involve making small incremental adjustments to an existing plan of action. Economist call these marginal changes Principle #4: People Respond to Incentives B. How People Interact Principle #5: Trade Can Make Everyone Better Off Principle #6: Markets are Usually a Good Way to Organize Economic Activity Principle #7: Government Can Sometimes Improve Market Outcomes C. How the Economy as a Whole Works Principle #8: A Countrys Standard of Living Depends on Its ability to Produce Goods and Services Principle #9: Prices Rise When the Government Prints Too Much Money Principle #10: Society Faces a Short-run Tradeoff Between Inflation and Unemployment...
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This note was uploaded on 01/14/2011 for the course ACCT C-090786 taught by Professor Prof.bantua during the Spring '10 term at Xavier - Ateneo de Cagayan.

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TEN PRINCIPLES OF ECONOMICS - Many decisions in life...

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