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principles of microeconomics study review

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Scarcity: The limited nature of society’s resources, natural resource, land and worker’s time are all limited in its availability Economics: How the society manages its limited resources Princi... ples of decision making 1. People face trade-offs 2. The cost of something is what you give up to get it 3. Rational people think at the margin 4. People respond to incentives Principles of concerning economic interactions 5. Trade can make everyone better off 6. Markets are usually a good way to organize economic activity 7. Government can sometimes improve market outcomes Principles that describe how the economy works as a whole 8. A country’s standard of living depends on its ability to produce goods and services 9. Prices rise when the government prints too much money 10. Society faces a short-run trade-off between inflation and unemployment Principal #1 Efficiency: the property of society getting the most it can from its scarce resources Equity: the property of distributing economic prosperity fairly among the members of society Principle #2 Opportunity cost: whatever must be given up to obtain some item Principal #3 Rational people: people who systematically and purposefully do the best they can to achieve their objectives Marginal changes: small incremental adjustments to a plan of action Principal #4 Incentive: something that induces a person to act Principal #5 Trade: Allows each individual to specialize in the activities she or he does best. Everyone will be better off Principal #6 Market econom [Show More]

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