TEN PRINCIPLES:
According to Dr. Greg Mankiw, a professor of economics at Harvard University, there is
no mystery to what an "economy" is. Whether we are talking about the local economy,
or the U.S. economy, or the world economy, the idea is the same: An economy is just a
group of people interacting with one another as they go about their lives.
We are going to refer to the following 10 principles at the beginning of this course and
we will continue to concentrate on them while studying economics. See his book,
Principles of Economics, for more information.
How People Make Decisions:
1- People face trade-offs.
2- The cost of something is what you give up to get it.
3- Rational people think at the margin (here, we are referring to marginal benefits vs.
marginal costs)
4- People respond incentives.
How People Interact With One Another:
5- Trade can make everyone better off.
6- Markets are usually a good way to organize economic activity.
7- Governments can sometimes improve market outcomes.
How The Economy As A Whole Works:
8- A country's standard of living depends on its ability to produce goods and services.
9- General price level rises when the money supply increases irresponsibly.
10- Society faces a short-run trade-off between inflation and unemployment.
