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ch 1 Book Notes - Book Notes Tuesday 4:02 PM 1 a principle...

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Because of the higher costs, these firms end up earning smaller profits, paying lower wages, charging higher prices, or some combination of these three Another trade-off society faces is between efficiency and equality. Efficiency means that society is getting the maximum benefits from its scarce resources. Equality means that those benefits are distributed uniformly among society's members when the government tries to cut the economic pie into more equal slices, the pie gets smaller Our study of economics, therefore, starts by acknowledging life's trade-offs a. principle 1: People Face Trade-offs 1. The opportunity cost of an item is what you give up to get that item. b. Principle 2: The Cost of Something is What You Give Up to Get It Rational people systematically and purposefully do the best they can to achieve their objectives, given the available opportunities. Economists use the term marginal changes to describe small incremental adjustments to an existing plan of action. Keep in mind that margin means "edge,"
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