Book Notes Chap 1
Economics- All about scarcity.
-Limited resources vs. unlimited wants
-How society manages resources
Ten Principles of Economics
Principle 1: People Face Trade Offs
-People must choose what to give up in order to attain something else.
-Society is getting max benefits from its scarce resources.
-Those benefits are distributed evenly among the society’s members.
*Efficiency is the size or quantity of goods where equality is how goods are divided.
Principle 2: The Cost of Something is What You Give Up to Get It
-Opportunity Cost is what must be given to attain an item. Time, money, goods, etc.
Principle 3: Rational People Think at the Margin
-People who systematically and purposefully do the best they can to achieve their
-Small incremental adjustments to existing plans of action.
-Marginal benefit is the value associated with the availability and use of an item.
Depends on how many units a person has.
* Marginal Benfit is how much something is worth to an individual and, commonly, at a point
will decrease with the increasing number of items.
Principle 4: People Respond to Incentives
-An Incentive is something that induces a person to act.
-People respond to incentives in good and bad ways.
EX. Increased safety decreased caution Principle 5: Trade Can Make Everyone Better Off
-Everyone is in competition wit