Equality efficiency society getting the most it can

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Efficiency vs. Equality Efficiency: society getting the most it can from its scare resources o Size of the economic pie Equality: distributing economic prosperity uniformly among the members of  society o How the pie is divided into individual slices Principle 2 : The cost of something is what you give up to get it People face trade-offs o Make decisions Compare cost with benefits of alternatives Opportunity Cost o Whatever must be given up to obtain one item o Most valuable (best) forgone use of that specific resource Principle 3 : Rational people think at the margin
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Rational People o Systematically & purposefully do the best they can to achieve their objectives Marginal Changes o Small incremental adjustments to a plan of action o Marginal Benefits Additional Benefits o Marginal Costs Additional Costs o Rational Decision Marker Take action only if: Marginal Benefits > Marginal Costs Principle 4 : People respond to incentives Incentive o Something that induces a person to act o Higher Price Buyers   consume less Sellers 
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