Macroeconomics class 1 , Ten Principles of Economics

Ten Principles of Economics
Introduction
ECONOMICS: the study of how society manages its scarce resources. The
management of society’s resources is important because resources are scarce.
SCARCITY: the limited nature of society’s resources.
ECONOMICS: the study of how society manages its scarce resources


How People Make Decisions
Principle 1: People Face Tradeoffs
EFFICIENCY: the property of society getting the most it can from its scarce
resources.
EQUITY: the property of distributing economic prosperity fairly among the
members of society

There is no such thing as a free lunch

Society faces a tradeoff between efficiency and equity

ECONOMICS: the study of how society manages its
scarce resources.

The management of society’s resources is
important because resources are scarce.
SCARCITY: the limited nature of society’s resources. ECONOMICS: the
study of how society manages its
scarce resources

Principle 2: The Cost of Something Is What You Give Up to Get It

Opportunity cost is what must be given up to obtain something

Principle 3: Rational People Think at the Margin

Rational people make systematic decisions to achieve objectives




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