University:
Loyola University Maryland
Course:
EC 102 | Microeconomic Principles
Academic year:

2024
Views:

457

Pages:

2
Author:

Natasya J.

Title : Ten Principles of Economics Course : Microeconomic Principles The word economy comes from the Greek word oikonomos, which means “one who manages a household”. At first, this origin might seem peculiar. But in fact, households and economies have much in common. A household faces many decisions. It must decice which household members do which tasks and what each member receives in return: Who cooks dinner? Who does the laundry? Who gets the extra dessert at dinner? Who gets to drive in the car? In short, a household must allocate its scarce resources (time, dessert, cat mileage) among its various members, taking into account each member’s abilities, efforts, and desires. Like a household, a society faces many decisions. It must find some way do decide what jobs will be done and who will do them. It needs some pople to grow food, other people to make clothing, and still others to design computer software. Once society has allocated people (as well as land, buildings, and machines) to various jobs, it must also allocate the goods and services they produce. It must decide who will eat caviar and who will eat potatoes. It must decide who will drive a Tesla and who will take the bus. 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 pople wish to have. Just as each member of a household cannot get everything she wants, each individual in society cannot attain highest standard of living to which she might aspire. Economics is the study of how society manages its scarce resources. In most societies, resources are allocated not by an all-powerful dictator but through the combined choices of millions of households and firms. Economists, therefore, study how people make decisions: how much they work, what they buy, how much they save, and how they invest their savings. Economists also study how people interact with one another. For instance, they examine how the multitude of buyers and sellers of a good together determine the price at which the good is sold and the quantity that is sold. Finally, economists analyze the forces and trends that affect the economy as a whole, including the growth in average income, the fraction of the population that cannot find work, and the rate at which prices are rising. The study of economics has many facets, but it is unified by several central ideas. In this chapter, we look at Ten Principles of Economics. Don’t worry if you don’t understand them all at first or if you aren’t completely convinced. We explore these ideas more fully in later chapters. The ten principles are introduced here to give you an overview of what economics is all about. Consider this chapter a “preview of coming attractions”.