Chapter 1 ten principles of economics y economics is the study of how society manages its scarce resources. They also study how people interact with one another. Principle #1: people face tradeoffs y there is no such thing as a free lunch y to get one thing that we like, we usually have to give up another thing that we like. Making decisions requires trading of one goal against another. y consider a student who must decide how to allocate her most valuable resource her time. She can spend all of her time studying economics; she can spend all of her time studying psychology; or she can divide her time between the two fields. For every hour she studies one subject, she gives up an hour she could have used studying the other. Laws that require firms to reduce pollution raise the cost of producing goods and services.