Economics is the study of the efficient allocation of society’s scarce resources.
Labor force (people), natural resources (water, woods, jungles, etc.), land, time,
capital, etc. are some of the resources that individuals and a society possess.
because our needs are always greater than the resources available to satisfy them.
there is never enough money to buy all the things that we want nor there is enough time to do all
the things that we would like to do.
Because resources are scarce individuals and societies must
use them in the best possible way, this is, individuals and societies must get the most out of their
PRINCIPLES OF ECONOMICS
Economics is all about making decisions.
Individuals make decisions about what to do with their
resources (how should I spend my money: buying a TV set or buying clothes? How should I spend
my Sunday afternoon: watching a game, doing my homework, or buying groceries?).
decisions, however, can affect other people as well.
For example, the manager of a company might
decide to buy a machine that makes the productive process much more efficient, which in the end
may reduce the final price for the customers.
The machine, however, replaces the work done by
two employees, who eventually will be laid off by the company.
Individual decisions, in
consequence, entail interactions among individual agents.
The authors mention 9 principles.
Resources are scarce
Decisions are taken at the margin
Decision-makers respond to incentives
Gains from trade
Markets move toward equilibrium
Resources should be used as efficiently as possible
Markets (usually) lead to efficiency
Government intervention is needed to correct the market’s shortcomings
Resources are Scarce
This is the reason why decisions must be made.
If resources were
unlimited we would not face the problem of deciding what to buy (and therefore,
what not to buy) or what to do (and therefore, what not to do).