The Seven Core Principles of Economics

Ten Principles of Economics Thinking Like an Economist Interdependence and the Gains from Trade The study of economics is guided by a few big ideas. Economists view the world as both scientists and policymakers. The theory of comparative advantage explains how people benefit from economic interdependence.

The book, Common Sense Economics written by James D. Gwartney, Ricahrd L.Stroup, Dwight R. Lee, and Tawni Ferrarini, gives a simple insight for reader into the inner workings economics in a common sense terms. The main point of the book is that to have economic success comes from low interference from the government, the motivation of individuals, and competitive markets.

1. Describe two examples of important things that financial planning skills can help you do, and explain why these things are important to you personally. (4-6 sentences. 2.0 points)

2. The key economic concept that serves as the basis for the study of economics is:

Economics is the branch of knowledge concerned with the production, consumption, and transfer of wealth. Economics can even be used a few different ways. They are the study of scarcity, the study of how people use resources, or the study of decision-making. One of the central tenets of economics is that people want certain things and will change their behavior to get those things according to American Economic Association. The economic study ranges from the very small to the very large. Much of economics involves the use of data gathered by governments, businesses, or in the laboratory to test the hypotheses about whether a certain program, event, or incentive will have the expected effect. Our nation is affected by economics in the way that you work, spend money, eat, simply just how you live on a regular

In understanding economics first summarize what is economics. No universally definition of economics. Although it defined as the study of how individuals and groups make decisions with limited resources, coordinate their wants and desires, given the decision mechanisms, social custom, and political realities of the society. Economic are operative in aspect of lives, market forces of goods sold in a market but supply and demand also used to analyzes situation in which economic forces operate. In addition to the study of

The three economic stances that a government may have are neutral stances, which indicate a balanced economy and leads to more tax revenue for the government. The second stance is the expansionary stance, which implies that the government is allocating or spending more money than it collects.

For example, when a good is scarce, the prices goes up, so consumers try to avoid buying and therefore conserving the resource. Then, the suppliers want to find more of the source as to get a better profit. The reasons behind their actions are selfish, yet they benefit all of society. Smith identified that the pursuit of profit and the power of self-interest would increase motivation and result in more advances in technology. His model of capitalism was on the basis of freedom and selfishness as a motivator for society. It was also on the basis that the economy would go through recessions and expansions but fix itself. Recessions are periods in the economy in which unemployment goes up, while profits and spending goes down; a slowdown of the economy. An expansion is essentially the exact opposite. The classical model of economics states that the economy will continue to go through these fluctuations over time and will fix itself with no help, thus not needing a government to give influence.

There are ten economic principles and of those ten, Krell points out four in this particular article. The first principle

Economic ideas provide a conceptual framework for understanding the forces that shape our personal and public lives.

√ Principles are expressed as the tendencies of typical or average consumers, workers, or business firms √ Generalizations • “Other things equal” assumption—controlling all variables except one • Abstractions—do not mirror the complexity of real world • Graphic Expressions—models used to show theory Policy Economics √ Applied Economics that recognizes the principles and data which can be used to formulate policies. √ Determining a course of action to resolve a problem or to further a nation’s economic goals

The three economic stances are, Stock Market: Is where stocks are bought and sold, Fiscal Policy: The government allowed to collect money within the state, and Economic Resources: The resources that include natural resources that are manufactured resources that are produced as things we need.

The #2 economic principle would be best suitable to describe the phrase "there is no such thing as a free lunch." People have endless needs and wants and when they're are struck with deciding on an opportunity cost, they are choosing something something while losing something else. Say you do get a free lunch, it's not free since you put time off doing something resourceful and it's not free for the people that gave you that free lunch. They used up time and limited resources to make that lunch. The #1 principle would apply in this situation. Resources are scarce so were paying the cost of losing them in the future. Nothing is technically

Three economic stances a government may have are neutral, expansionary, and contractionary. A neutral stance indicates a balanced economy. In most cases this stance leads to more tax revenue for the government. Expansionary implies that the government is spending or allocating more money than it collect. Contractionary implies that the government is collecting more money than it spends of allocates.

The Economy is the backbone to society. There are many factors that operate in, and govern our society’s economical structure. Factors such as scarcity and choice, opportunity cost, marginal analysis, microeconomics, macroeconomics, factors of production, production possibilities, law of increasing opportunity cost, economic systems, circular flow model, money, and economic costs and profits all contribute to what is known as the economy. These properties as well as a few others, work together to influence the economy. Microeconomics and Macroeconomics are two major components. Both of these are broken down into several different components that dictate societal norms and views.