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CHAPTER 1 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

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CHAPTER 1 TEN PRINCIPLES OF ECONOMICS

The management of society`s resources is important because resources are scarce. Scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have.
Economics is the study of how society manages its scarce resources. In most societies, resources are allocated not by a single central planner but through the combined actions of millions of households and firms. Economists therefore study how people make decisions. Economists also study how people interact with one another.

Principle #1: People Face Tradeoffs
To get one thing that we like we usually have to give up another thing that we like. Making decisions requires trading off one goal against another.
Another tradeoff society faces is between efficiency and equity. Efficiency means that society is getting the most it can from its scarce resources. Equity means that the benefits of those resources are distributed fairly among society`s members. In other words efficiency refers to the size of the economic pie, and equity refers to how the pie is divided.

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