Econ Lecture 1 - The Ten Principles of Economics How People...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
The Ten Principles of Economics How People Make Decisions Principle #1: People Face Tradeoffs a. All decisions involve tradeoffs. Efficiency vs. Equality. a. Efficiency: When society gets the most from its scarce resources b. Equality: When prosperity is distributed uniformly among society's members. c. Tradeoff: to achieve greater equality, could redistribute income from wealthy to poor. But this reduces incentives to work and produce, shrinks the size of the economic "pie". Principle #2: The cost of something is what you give up to get it a. Making decisions requires comparing the costs and benefits of alternative choices b. The Opportunity Cost of any item is whatever must be given up to obtain it. c. It is the relevant cost for decision making. d. TANSTAAFL Principle #3: Rational people think at the margin Rational people. .. a. systematically and purposefully do the best they can to achieve their objectives.
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.
Ask a homework question - tutors are online