Chapter 1: The 10 Principles Of Economics

Question 1

What is the origin of the word “Economics”?

Answer 1

“Oikonomos” (Greek)
One who manages households

Question 2

Define Scarcity

Answer 2

The limited nature of societies resources.

Question 3

Define Economics

Answer 3

The study of how society manages its scarce resources.

Question 4

What do economists study?

Answer 4

How people make decisions.
How people interact with one another.
The forces and trends that affect economy as a whole.

Question 5

What are the 10 principles of economics?

Answer 5

1. People face trade-offs.
2. The cost of something is what you give up to get it.
3. Rational people think at the margin.
4. People respond to incentives.
5. Trying to make everyone better off.
6. Markets are usually a good way to organize economic activity.
7. Governments can sometimes improve market outcomes.
8. A country standard of living depends on its ability to produce goods and services.
9. Prices rise when the government prints too much money.
10. Society faces a short-run of trade-off between inflation and unemployment.

Question 6

What is efficiency?

Answer 6

It is when Society is getting the maximum benefit from scarce resources.
Society

Question 7

What is equality?

Answer 7

It is distributing economic prosperity uniformly among the members of society.
Individual

Question 8

What is opportunity cost?

Answer 8

Whatever must be given up to obtain some item.

Question 9

What are Rational People?

Answer 9

People who systematically and purposefully do the best they can to achieve their objectives given the available opportunities.

Question 10

Define Marginal Changes

Answer 10

Small incremental adjustments to a plan of action.