Ch 1 The Principles Of Economics

Front 1

Ten Principles of Economics

Back 1

1. Trade-offs
2. Opportunity Costs
3. Rational Decision occurs at the margin
4. Incentives and Costs Matter
5. Trade Benefits Everyone Overall
6. Free Markets are good at efficient allocation
7. Government can sometimes improve some market outcomes
8. Standards of Living come from the ability to produce more goods and services
9. Printing money leads to higher prices
10. Short-term trade-off: Inflation v.s. Unemployment

Front 2

Principle 1: Trade-offs

Back 2

Everything has a cost
-sacrifices have been made to achieve something else

Front 3

Principle 2: Opportunity Cost

Back 3

whatever we give up for an item service

Front 4

Principle 3: Rational Decisions occur at the margin

Back 4

- the margin is where the cost is higher than the benefit
Ex: when you stop eating because you are full
- rational people often make decisions by comparing marginal benefits or costs

Front 5

Principle 4: Incentives and Costs Matter

Back 5

-whatever induces a person to act (usually money or pride)
- the costs and incentives in our society
ex: unemployment - 95% - the problem is that unemployment gets unemployment that are equal or more than the benefits of a job
-sometimes incentives are perverse

Front 6

Market Power

Back 6

the ability of a single economic person (or small group of peope) to have a substantial influence on market price

Front 7

Inflation

Back 7

an increase in the overall level of prices in the economy