Economics Essay

1930 Words8 Pages
INTRODUCTION The word economy comes from the Greek word for ”one who manages a household.” According to Mankiw (2004), Economics has been defined as the study of how society manages its scarce resources. The management of society’s resources is important because resources are scarce. Scarcity and choice are the two basic economic principles but I am going to discuss about the ten principles of economics. TEN PRINCIPLES OF ECONOMICS 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. Take for example a student who must decide how to allocate his most valuable resource which happens to be time. He can spend all of his time studying marketing, he can spend all of his time playing soccer or he can divide his time between the two fields. In this case, the student has to sarifice one thing for another to achieve a specific goal. Society also faces a tradeoff between efficiency and equity. Efficiency comes in when society is getting the most it can from its scarce resources. Equity on the other hand means that the benefits of those resources are distributed fairly among society’s members. Recognizing that people face tradeoffs does not necessarily tell us what decisions we should make. Acknowledging life’s tradeoffs is important because people are likely to make good decisions if they understand the options that they have available. 2. The Cost of Something is What You Give Up To Get It. Because people face tradeoffs, making decisions requres comparing the costs and benefits of alternative courses of action.Scarcity of economic resources forces people to make tradeoffs. That is, people must always consider how to spend thier own limited incomes or time because resources are limited to sayisfy their unlimited needs and wants.When we

More about Economics Essay

Open Document