10 principles of Economics

The Principle of Productivity

According to this principle, the richer a country is, the higher her productivity levels.

Market Efficiency and Government

Governments might get involved in the welfare of inefficient markets. A government can also intervene if a market fails to distribute. Often, the failure of a market is due to externality meaning the product impacts more than direct sellers and buyers. For instance, cars usually benefit drivers, but their emissions might be a concern to the government due to their related health issues.

Markets Organize Economic Activity

In economics, a market is a place where individuals make agreements, settle on a specific price, and finally communicate to the masses. For instance, the food market can have farmers that agree to dispose of their goods at a set price, and then retailers or supermarkets communicate the costs by disposing the goods to the public.

Too Much Money Results to Inflation

This is the principle of inflation. When prices go up, it's usually a reflection of the amount of money being printed. As much as more money it's often an indication of inflation, which causes prices of commodities and services to go up. In the end, the money in one's pocket becomes valueless.

Response to Incentives

Whether in bad or good ways, people must respond to incentives. The most important thing to remember is that the response must be there.

Here's a great example;

A bar may offer a buy two get two free drinks … Free drinks represent the right side of the coin. On the flip side, a wrong side can be a student that foregoes studying to grab the free drinks on offer. Either way, there was a response to an incentive.

Cost-Benefit Analysis

With this principle, marginal thinking is necessary for small adjustments. For instance, a movie theater can offer matinee prices knowing very well that fewer people attend movies in the afternoon.

Given that the standard movie price is $10, the theater will dispose of two tickets for a matinee show. However, if the theater offers a $6 matinee price, it'll end up selling five tickets. The 40 percent discount on offer will rake in $10 more per ticket. That is basically what the principle of cost-benefit analysis is all about.

Opportunity Cost of Resources

The policy of opportunity cost emphasizes whatever you gave up. For instance, you can take a lollipop, which has an economic profit tied to it, let's say $0.85.

Nonetheless, you had to give up a chocolate bar that had an economic profit of $0.45. By doing that, you gained $0.40 for the choice you made. What if you didn't have a choice? What if you were only offered the lollipop? It means that you wouldn't have to give up anything. Consequently, you would have gained a profit of $0.45. Get the drift?

The principle of opportunity cost seems to be the most difficult to master. If you're having challenges grasping it, you have sought help with your economics homework from various platforms both online and offline.

Final Words

Economics is a crucial part of our life. There's no doubt about that. Everything we do is connected in one way or another to this subject. Whether you merely sit home to watch a TV all evening or purchase something for lunch, there's an array of economic principles at play.

Therefore, being familiar with the fundamental principles of economics is highly essential. It can be quite helpful in not only assisting you in grasping whatever is going on around you but also goes miles to enable you to make better and well-informed decisions that are virtually important in different spheres of life.

The above are the ten principles of economics.