Economic Principles Essay

1247 Words Oct 15th, 2013 5 Pages
Unit One: Introduction
Chapter 1: Ten Principles of Economics
Learning Objectives * Learn that economics is about the allocation of scarce resources * Examine some of the trade-offs that people face * Learn the meaning of opportunity cost * See how to use marginal reasoning when marketing decisions * Discuss how incentives affect people’s behavior * Consider why trade among people or nations can be good for everyone * Discuss why markets are good, but not perfect, way to allocate resources * Learn what determines some trends in the overall economy
Ten Principles of Economy * Management of society’s resources is important because resources are scarce * Scarcity – limited nature of society’s
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However, people are willing to pay more for an extra diamond because of the marginal benefit that extra unit will yield * A rational decision maker takes an action if the marginal benefit of the action exceeds the marginal cost

Principle #4: People Respond to Incentives * Incentive – something (benefit or punishment) that induces a person to act * Because rational people make decisions by comparing costs and benefits, they respond to incentives * For example, when the price of an apple rises, people eat more pears, however farmers hire more workers and harvest more apples because the benefit of selling an apple is also higher
How People Interact
Principle #5: Trade Can Make Everyone Better Off * Trade is not a competition, overall it makes two subjects better off * For

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