Ten Principles Of Economics And The Data Of Macroeconomics Essay

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Ten Principles of Economics and the Data of Macroeconomics Mankiw explains that economics is the study of how society manages its scarce resources. And, how the combined choices of millions of households and firms determine how those resources are allocated. To understand these complex concepts, economists must study how people make decisions, how people interact with other people, and the forces and trends that affect the entire economy (p. 16). To do so, economists assume many roles. Economists – Scientists, Policymakers, or Both In many circumstances, economists must approach the issues as objectively as a scientist would. Mankiw explains that economists must make assumptions, build models and test their theories (p. 34). Although there is rarely an opportunity for an economist to experiment as precisely as a scientist, the field has found ways to conduct its research and organize its basic principles. The Ten Principles of Economics These principles are categorized into three groups: how individuals make decisions, how people interact with other people, and the economy as a whole. Each principle is listed according to category. How Individuals Make Decisions 1. People Face Trade-offs 2. The Cost of Something is What One Gives Up to Get It 3. Rational People Think at the Margin 4. People Respond to Incentives How People Interact with Each Other 5. Trade Makes Everyone Better Off 6. Markets Organize Economic Activity 7. The Government May Improve Market Outcomes
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