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Ten Principles of Economics

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Ten Principles of Economics

Economy. . .
. . . The word economy comes from a Greek word-Oekonomous- for “one who manages a household.”

Any similarity between household and economics?

Copyright © 2004 South-Western/Thomson Learning

TEN PRINCIPLES OF ECONOMICS
• A household and an economy face many decisions:
• Who will work? • What goods and how many of them should be produced? • What resources should be used in production? • At what price should the goods be sold?

Copyright © 2004 South-Western/Thomson Learning

TEN PRINCIPLES OF ECONOMICS
Society and Scarce Resources:
• The management of society’s resources is important because resources are scarce. • Scarcity. . . means that society has limited resources and therefore cannot produce all the goods and services people wish to have.

Copyright © 2004 South-Western/Thomson Learning

TEN PRINCIPLES OF ECONOMICS
Economics is the study of how society manages its scarce resources.

Copyright © 2004 South-Western/Thomson Learning

TEN PRINCIPLES OF ECONOMICS
• How people make decisions.
• • • • People face tradeoffs. The cost of something is what you give up to get it. Rational people think at the margin. People respond to incentives.

Copyright © 2004 South-Western/Thomson Learning

TEN PRINCIPLES OF ECONOMICS
• How people interact with each other.
• Trade can make everyone better off. • Markets are usually a good way to organize economic activity. • Governments can sometimes improve economic outcomes.

Copyright © 2004 South-Western/Thomson Learning

TEN PRINCIPLES OF ECONOMICS
• The forces and trends that affect how the economy as a whole works.
• The standard of living depends on a country’s production. • Prices rise when the government prints too much money. • Society faces a short-run tradeoff between inflation and unemployment.

Copyright © 2004…...

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