Chapter 1 - CHAPTER 1 TEN PRINCIPLES OF ECONOMICS...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: CHAPTER 1 TEN PRINCIPLES OF ECONOMICS Introductory Remarks Economy – Greek for “one who manages a household” Household faces many decisions – must allocate its scarce resources Society faces many decisions Management of society’s resources is important because resources are scarce Scarcity : Limited nature of society’s resources:land,labour,capital. Scarce resources have alternative uses. Economics : Study of how society manages its scarce resources. Issues studied in economics include: 1. How people make decisions. 2. How people interact with one another. 3. How economy as a whole works. HOW PEOPLE MAKE DECISONS Principle #1: People Face Tradeoffs All decisions involve tradeoffs “there is no such a thing as a free lunch”- Getting one thing entails giving up something. Examples of tradeoff:- “guns and butter” tradeoff - Clean environment vs. high level of income- Efficiency vs. equity Efficiency : getting the most out of scarce resources Equity : distributing economic prosperity fairly among society’s members Increasing equity by redistributing income from the rich to the poor reduces the incentive to work and produce and shrinks the size of the economic “pie” Making decisions requires comparing the costs and benefits of alternative choices. Opportunity cost: whatever must be given up to obtain an item. Opportunity cost is the relevant cost for decision making Examples : 1. Going to college 2. Going to a movie Principle #2: The Cost of Something Is What You Give Up to Get It...
View Full Document

{[ snackBarMessage ]}

Page1 / 21

Chapter 1 - CHAPTER 1 TEN PRINCIPLES OF ECONOMICS...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online