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TenPrinciplesofEconomics


The Ten PrinciplesEdit

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.

Principle 10: Society faces a short-run trade-off between inflation and unemployment.

VocabularyEdit

Scarcity

  • Definition: The limited nature of society's resources.
  • What It Means:

Economics

  • Definition: The study of how society manages its scarce resources.
  • What It Means:

Efficiency

  • Definition: The property of society getting the most it can from its scarce resources.
  • What It Means:

Equality

  • Definition: The property of distributing economic prosperity uniformly among the members of society.
  • What It Means:

Opportunity Cost

  • Definition: Whatever must be given up to obtain some item.
  • What It Means:

Rational People

  • Definition: People who systematically and purposefully do the best they can to achieve their objectives.
  • What It Means:

Marginal Changes

  • Definition: Small incremental adjustments to a plan of action.
  • What It Means:

Incentive

  • Definition: Something that induces a person to act.
  • What It Means:

Market Economy

  • Definition: An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services.
  • What It Means:

Property Rights

  • Definition: The ability of an individual to own and exercise control over scarce resources.
  • What It Means:

Market Failure

  • Definition: A situation in which a market left on its own fails to allocate resources efficiently.
  • What It Means:

Externality

  • Definition: The impact of one person's actions on the well-being of a bystander.
  • What It Means:

Market Power

  • Definition: The ability of a single economic actor (or small group of actors) to have a substantial influence on market prices.
  • What It Means:

Productivity

  • Definition: The quantity of goods and services produced from each unit of labor input.
  • What It Means:

Inflation

  • Definition: An increase in the overall level of prices in the economy.
  • What It Means:

Business Cycle

  • Definition: Fluctuations in economic activity, such as employment and production.
  • What It Means:

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