Economics: Core Principles and Applications
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Economics
Definition
Derived from the Greek word ‘oikonomos,’ meaning “one who manages a household,” economics studies how societies allocate scarce resources to satisfy unlimited wants and needs.
Core Principles
- Trade-offs: Acquiring something necessitates forgoing something else (e.g., watching TV versus studying).
- Opportunity Cost: The cost of something is the value of the next best alternative forgone.
- Marginal Thinking: Rational individuals make decisions by comparing the additional benefits and costs of an action.
- Incentives: People's behavior is influenced by incentives, such as price changes (e.g., lower prices may increase consumption).
- Benefits of Trade: Specialization and trade allow individuals and nations to achieve higher levels