Chapter1 - Chapter 1: Ten Principles of Economics Scarcity:...

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Chapter 1: Ten Principles of Economics - Scarcity: the limited nature of society’s resources - Economics: the study of how society manages its scarce resources How People Make Decisions 1. Principle 1: People Face Trade Offs a. Give up one thing that we like, to get another thing we like b. Example: more society spends on national defense (guns) to protect from foreign invasion, less it can spend on consumer goods (butter) to raise standard of living at home c. Efficiency: the property of society getting the most it can from its scarce resources d. Equality: the property of distributing economic prosperity uniformly among members of society 2. Principle 2: The Cost of Something Is What You Give Up to Get It a. Opportunity Cost: whatever must be given up to obtain some item 3. Principle 3: Rational People Think at the Margin a. Rational People: people who systematically and purposefully do the best they can to achieve their objectives b. Rational people know that decisions in life involve shades of gray b.i. Make decisions if and only if marginal benefit of action exceeds
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Chapter1 - Chapter 1: Ten Principles of Economics Scarcity:...

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