Chap 1: 10 principles of Microeconomics

Basic concepts of Economics

Scarcity - the limited nature of society’s resources
Needs, wants >> Supplying ability
Economi- the study of how society manages its scarce resources
How people decide what to buy, how much to work, save and spend
How firms decide how much to produce, how many workers to hire
How society decides how to divide its resources between national defense, consumer goods,
protecting the environment and other needs

The principles of how people make decisions

All decisions involve tradeoff - efficiency vs equality
The cost of sth is what you give up to get it
Making decisions requires comparing the costs and benefits of alternative choices
The opportunity cost of any item is whatever must be given to obtain it
Ex: 10B for doing business vs 10B for saving
Opportunity cost for doing business = the benefits of saving:
an interest of 5% for saving 10B
a sense of safety
freetime
Opportunity cost for saving = the benefits of doing business:
profit
experience and knowledge
networking