June 2, 2020

10 Principles of Economics

Source: Principles of Economics, 8th Edition by Gregory Mankiw

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
  4. People Respond to Incentives

How People Interact

  1. Trade Can Make Everyone Better Off
  2. Markets Are Usually a Good Way to Organize Economic Activity
  3. Governments Can Sometimes Improve Market Outcomes

How the Economy As a Whole Works

  1. A Country’s Standard of Living Depends on Its Ability to Produce Goods and Services
  2. Prices Rise When the Government Prints Too Much Money
  3. Society Faces a Short-Run Trade-off between Inflation and Unemployment