1. ECON202, Maclachlan1 SEVEN PRINCIPLES OF ECONOMICS Chapter 1

2. 2 ECONOMY From the Greek for one who manages a household. (from Greek oikonomia ‘household management,’ based on oikos ‘house’ + nemein ‘manage.’) Key concept: scarcity.

3. 3 Definition Economics: the study of how society manages its scarce resources. Scarcity - The problem of having unlimited wants but limited resources.

4. Two focuses to studying Economics Microeconomics – the study of the economic decisions and actions of individual people, companies, etc. Macroeconomics - a study of economics in terms of whole systems especially with reference to general levels of output and income and to the interrelations among sectors of the economy 4

5. ECON202, Maclachlan5

6. 6 1. People face trade-offs.

7. ECON202, Maclachlan7 2. The cost of something is what you give up to get it.

8. ECON202, Maclachlan8 3. Rational people think at the margin.

9. ECON202, Maclachlan9 4. People respond to incentives.

10. ECON202, Maclachlan10 5. Trade can make everyone better off.

11. ECON202, Maclachlan11 6. Markets are usually a good way to organize economic activity.

12. 7. Future consequences count.