Principles of Economics

• Principle 1 - People Face Trade-offs
• Principle 2 - The Cost of Something Is What You Give Up to Get It
• Principle 3 - Rational People Think at the Margin
• Principle 4 - People Respond to Incentives
• Principle 5 - Trade Can Make Everyone Better Off
• Principle 6 - Markets Are Usually a Good Way to

  Organize Economic Activity
• Principle 7 - Governments Can Sometimes Improve Market Outcomes
• Principle 8 - A Country’s Standard of Living Depends on Its Ability to Produce Goods and Services
• Principle 9 - Prices Rise When the Government Prints Too Much Money
• Scarcity - The limited nature of society's resources.
• Economics - The study of how society manages its scarce resources.
• Efficiency - The property of society getting the most it can from its scarce resource.
• Equality - The property of distributing economic prosperity uniformly among the members of society.
• Opportunity Cost - Whatever must be given up to obtain some item.
• Rational People - People who systematically and purposefully do the best they can to achieve their objectives.
• Marginal Change - A small incremental adjustment to a plan of action.
• Incentive - Something that induces a person to act.
• Market Economy - An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services.
• Property Rights - The ability of an individual to own and exercise control over scarce resources.
• Market Failure - A situation in which a market left on its own fails to allocate resources efficiently.
• Externality - The impact of one person's actions on the well-being of a bystander.
• Market Power - The ability of a single economic actor (or small group of actors) to have a substantial influence on market prices.
• Productivity - The quantity of goods and services produced from each unit of labor input.
• Inflation - An increase in the overall level of prices in the economy.
• Business Cycle - Fluctuations in economic activity, such as employment and production.
• Principle 10 - Society Faces a Short-Run Trade-off between Inflation and Unemployment