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principles of economics
(chapter 1)
two fundamentals of economics
unlimited wants
limited economic resources:
land or natural resources: minerals, forests, oil deposits, water resources
physical capital: tools ad machinery, buildings, transportation, construction
labor or human resources
what economics is all about:
scarcity is the limits of society’s resources-how we deal with it
10 principles of economics:
#1 people face tradeoffs: giving up something for something else (more than
one choice)
#2 opportunity cost: the cost of something when the next best choice is given
up (you don’t give up all the choices at the same time)
#3 rational people think at the margin: marginal cost (mc) and marginal benefit
(mb) of doing things by evaluating marginal changes (small change) MB>MC-
always do it (right decision); MB<MC-change our decision (to not lose
anything)
#4 people respond to incentives: something that induces a person to act
(reward/punishment)
principles of economics (chapter 1) 1
principles of economics
(chapter 1)
two fundamentals of economics
unlimited wants
limited economic resources:
land or natural resources: minerals, forests, oil deposits, water resources
physical capital: tools ad machinery, buildings, transportation, construction
labor or human resources
what economics is all about:
scarcity is the limits of society’s resources-how we deal with it
10 principles of economics:
#1 people face tradeoffs: giving up something for something else (more than
one choice)
#2 opportunity cost: the cost of something when the next best choice is given
up (you don’t give up all the choices at the same time)
#3 rational people think at the margin: marginal cost (mc) and marginal benefit
(mb) of doing things by evaluating marginal changes (small change) MB>MC-
always do it (right decision); MB<MC-change our decision (to not lose
anything)
#4 people respond to incentives: something that induces a person to act
(reward/punishment)
principles of economics (chapter 1) 1
