Economics is a study of mankind in the ordinary business of life.

What is Economics

Economics is a study of mankind in the ordinary business of life.

Why we study it?

  • It will help you understand the world in which you live;
  • It will make you a more astute participant in the economy;
  • It will give you a better understanding of both the potential and the limits of economy policy.


The Principles of Economics

Economics is the study of how society manages its scarce resources.

How People Make Decisions

Principle 1:People Face Trade-offs

To get one thing, we have to give up another thing.

  • Efficiency:the property of society getting the most it can from its scarce resources;
  • Equality:the property of distributing economic prosperity uniformly among the members of society.

Efficiency will be reduced while achieving greater equality.

Principle 2:The Cost of Something Is What You Give Up to Get It
  • Opportunity cost:Whatever must be given up to obtain some item.
Principle 3:Rational People Think at the Margin

Marginal benifit & cost

  • Marginal Change:A small incremental adjustment to a plan of action
Principle 4:People Respond to Incentives
  • Incentive:Something that induces a person to act.
Principle 5:Trade Can Make Everyone Better Off

Without trade, your family need to grow its own food, clothes..

Principle 6:Markers Are Usually a Good Way to Organize Economic Activity
  • 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