Acceptable logotypeECO 2030. Principles of Economics-Price Theory



  1. Definition - economics is the study of the allocation of scarce resources (goods and services)
  2. Resources - labor, land, capital, time, technology
  3. Scarcity - wants > ability of resources to satisfy wants
  4. Allocation mechanism - tradition, socialism/communism, capitalism (markets)
  5. Microeconomics (chapter 2) - the study of individual decision makers (consumers, firms)
  6. Macroeconomics (chapter 2) - the study of "the economy" as a whole (GDP, inflation, unemployment)

Rational Choice

  1. Choice: "People face tradeoffs"
  2. Opportunity Cost: "The cost of something is what you give up to get it"
  3. Marginal Decisions: "Rational people think at the margin"
  4. Incentives Matter: "People respond to incentives"

Gains from Trade

  1. Trade Creates Value: "Trade can make everyone better off"
  2. Market Efficiency: "Markets are usually a good way to organize economic activity"
  3. Market Failure: "Governments can sometimes improve market outcomes"