Basic Principles:

• The basic economic principles that would clarify what is happening may remain unknown to public and little understood by the media.

• These basic principles of economics apply in many very different kinds of economies—capitalist, socialist, feudal, or whatever—and among a wide variety of peoples, cultures, and governments.

• Perhaps most of us think of an economy as a system for the production and distribution of the goods and services we use in everyday life.

  • British economist named Lionel Robbins defined economics as the study of use of scarce resources which have alternative uses.

Scarcity:

• Scarce means that what everybody wants adds up to more than there is.

  • For example, middle-class Americans’ desires exceed what they can comfortably afford, even though what they already have would be considered unbelievable prosperity by people in many other countries around the world or even by earlier generations of Americans.

• There has never been enough to satisfy everyone completely. That is the real constraint. That is what scarcity means.

• Nothing has been more pervasive in the history of the human race than scarcity and all the requirements for economizing that go with scarcity.

Productivity:

• Economics is not just about dealing with the existing output of goods and services as consumers, it is about producing that output from scarce resources in the first place turning inputs into output.

• Economics studies the consequences of decisions that are made about the use of land, labor, capital and other resources that go into producing the volume of output which determines a country’s standard of living.

• This is also the reason why there are poor countries with rich natural resources.

• Different kinds of economies are essentially different ways of making decisions about the allocation of scarce resources.

• Efficiency in production is the rate at which inputs are turned into output.

• Economics is not about money, it’s about the volume of goods and services which determines whether a country is poverty stricken or prosperous.

The Role of Economics:

• Economics is not personal finance or business administration, and predicting the ups and downs of the stock market has yet to be reduced to a dependable formula.

• Economics is a systematic study cause of cause and effect, showing what happens when you do specific things in specific ways.

• Consequences matter more than intentions and not just the immediate consequences, but also the long run repercussions.

• Intentions are not the only thing necessary to run the economy, but the knowledge of how economy works is.

• The basic principles of economics are not just the matter of opinion.

• Economics is a tool of cause and effect analysis, a body of tested knowledge and principles derived from that knowledge.

• Money doesn't even have to be involved to make a decision be economic.