Ten Principles of Economics

Principle #1

People face tradeoffs.

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.P

Principle #9

Prices rise when the government prints too much money.

Principle #10

Society faces a short-run tradeoff between inflation and unemployment.

What are Principles #1-4 about?

How people make decisions.

What are Principles #5-7 about?

How people interact.

What are Principles #8-10 about?

How the economy as a whole works.