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ECN 104 (387)
Chapter 1-10

Chapter 1 - 10 principles of Ecnomics.doc

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ECN 104
Frank Trimnell

Chapter 1-Ten Principles of Economics 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 scare resources. Equity: The property of distributing economic prosperity fairly among the members of society. Principle #2: The Cost of Something is what you Give up to Get It. Opportunity Cost: Whatever must be given up to obtain some item. Principle #3: Rational People Think at the Margin Rational People: People who systematically and purposefully do the best that they can to achieve their objectives. Marginal Changes: Small incremental adjustments to a plan of action. Principle #4: people respond to incentives Incentive: something that induces a person to act How People Interact Principle #5: Trade Can Make Everyone Better Off Principle #6: Markets Are Usually a Good Way to Organize Economic Activity Market Economy: Economy that allocates resources though the decentr
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