ECON 20 Chapter 1: Econ_20_Tnotes_1_

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Simply stated, economics is the study of how people make choices under conditions of scarcity. & the results of those choices on society. More importantly, microeconomics is the study of how firms and households make decisions in allocating their scarce resources. Other sub categories of economics: positive economics attempts to explain what happens and why, normative economics attempts to explain what should or ought to happen. In real life, people are faced with choices. If you choose to go to soccer you cannot study for economics. The scarcity principle recognises that there is no free lunch and individuals face trade-offs. They must compromise between their competing interests, more of "x" means less of. Before making any decisions, individuals must weight up the costs and benefits that would result from their choice. The cost benefit principle states that an should undertake a particular action if the marginal benefits exceed the marginal costs.

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