Unit 1 Econ 7 Principles That Guide an Economic Way of Thinking

scarcity forces trade-offs (def)

When there is not enough of something and you have to choose between 2 things as a result, sacrificing something that you wanted

cost versus benefits (def)

When the benefits of doing something are greater or worth the cost

thinking at the margin (def)

deciding to do a little more of something or a little less of something to balance time

incentives matter (def)

something that is already known that persuades someone to act a certain way or do a certain thing, often positive

trade makes people better off (def)

focus on what you do well and trading with others. not trying to do everything by ourselves

markets coordinate trade (def)

markets coordinating trade between buyers and sellers

future consequences count (def)

not doing something because you know there will be consequences for it in the future

scarcity forces trade-offs (ex)

(ex)If your friends want to go out for dinner but you have been saving money for new shoes. you have to decide if you want go with your friends or buy the shoes

cost versus benefits (ex)

(ex) going to college is expensive but you well eventually get a job in a field that you love and a job that you love

thinking at the margin (ex)

(ex) deciding whether to work a couple more hours or go home and go to bed and get more sleep

incentives matter (ex)

(ex) seniors come to class and maintain good grades so they can do Senior Capstone in May

trade makes people better off (ex)

(ex)if I am good at math and tutor someone in math and they are good at history and they tutor me in history

markets coordinate trade (ex)

(ex) the farmers market in Loudoun One

future consequences count (ex)

(ex) you don't skip class because you know you will get in trouble

Economics

The study of how people seek to satisfy their needs and wants by making choices

economy

A system for producing and distributing goods and services to fulfill people's wants

Scarcity

A situation in which unlimited wants exceed the limited resources available to fulfill those wants

Microeconomics

the study of how households and firms make decisions and how they interact in markets

Macroeconomics

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

Positive Economics

the branch of economic analysis that describes the way the economy actually works

normative economics

makes prescriptions about the way the economy should work