10 Economic Principle of
Economics
People Face Tradeoffs
The Cost of Something Is
What You Give Up to Get It
Rational People Think at the
Margin
People Respond to
Incentives
Trade Can Make Everyone
Better Off
Markets Are Usually A Good
Way to Organize Economic
Activity
Governments Can
Sometimes Improve Market
Outcomes
Brief description of the
principles
This principle recognizes that
people and society must distribute
limited assets among conflicting
needs and wants by making
decisions that frequently include
tradeoffs.
This principle places a strong
emphasis on the idea of the cost of
opportunity, which is the value of
the next best option that must be
given up while making a decision.
According to this theory, people
make judgments by weighing the
advantages and disadvantages of
little adjustments or gradual
changes.
This principle acknowledges that
individuals and organizations often
react to changes in incentives.
Rewards or punishments that serve
as incentives.
The idea helps in understanding
the significance of social
interaction in an economy. It
illustrates to us how trading with
one another is preferable to
carrying out all the tasks on our
own.
This idea clarifies how people
communicate with one another in
an economy. It provides us with a
thorough summary of how
individuals migrate from centrally
planned to market economies in an
economy.
This idea clarifies the role of the
government in enhancing market
outcomes.
Examples of this
principles
A student must decide whether to
spend time with friends or studying
for an exam. They compromise on
the possible advantages of the
other alternative by selecting the
first one.
You weigh all available options,
including saving money for a
vacation or buying something else,
before determining whether to buy
a new cellphone.
Before deciding to produce more of
a product, a business evaluates the
costs and advantages of doing so to
see if the marginal benefit is
greater than the marginal cost.
When a restaurant offers a deal
during lunch, more people visit
because they are attracted by the
incentive of a cheaper price.
Two nations engage in trading and
specialize in producing goods in
which they have a comparative
advantage. Because of this,
consumers in both countries can
obtain a greater range of products
at cheaper prices.
In a market economy, buyers and
sellers meet to trade products and
services at prices that are mutually
acceptable. This makes it possible
to allocate resources effectively
and encourages competition, which
can result in better products and
reduced pricing for customers.
To stop the misuse of market
dominance and safeguard
consumers, the government
supervises monopolies. It can

A country’s standard of
living depends on its ability
to produce goods & services.
Prices rise when the
government prints too much
money.
Society faces a short-run
tradeoff between inflation
and unemployment
Submitted by: Richard A. Diotay Jr
According to this concept,
productivity and the ability to
generate products and services are
significant determinants of a
nation's level of life.
This idea explains why the
government issuing too much
money causes inflation and price
increases in an economy.
According to this theory, the
short-term rates of unemployment
and inflation are inversely related.
result in reduced pricing and
better-quality goods by
encouraging competition.
A nation can raise its residents'
standards of living by investing in
infrastructure, technology, and
education. This will increase the
productivity of the nation and its
ability to generate more goods and
services.
Inflation can result from a
government issuing an excessive
amount of more money, which
raises the cost of goods and
services.
Short-term inflation may increase
when the government adopts
expansionary policies to boost the
economy and lower
unemployment, such as raising
expenses or decreasing interest
rates.