Economics (Fach) / 10 principles of economics (Lektion)

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• Principle 1. People face trade-offs   To get something you want, you have to give up a another thing. Making decisions requires trading off one goal against another. A trade-off society faces is between efficiency and equity.
• Efficiency: getting the most possible from scarce resources.
• Equity:  benefits of resources are distributed fairly among society's members.
• Principle 2. The cost of something is what you give up to get it The opportunity cost of something is what you give up to get the thing you want.
• Principle 3. Rational People think at the margin  The term marginal changes describes the small incremental adjustments to an existing plan or action. By comparing marginal benefits and marginal costs, making a decision becomes easier.
• Principle 4. People respond to incentives Because people make decisions by comparing costs and benefits, their behavior may change when the costs or benefits change.
• Principle 5. Trade can make everyone better off Trade allows each person to specialize in the activities he or she does best, thus by trading with others, people can buy a greater variety of goods and services at lower cost.
• Principle 6. Markets are usually a good way to organize economic activity In a market economy, the decisions of a central planner are replaced by the decisions of millions of firms and households. Supply and demand decide how many goods are produced.
• Adam Smith households and firms interacting in markets act as if they are guided by an 'invisible hand' that leads them to desirable market outcomes.
• Principle 7. Governments can sometimes improve market outcomes The invisible hand needs the government to protect it. Markets work only if property rights are enforced. There are two good reasons for why we need the government: 1. to promote efficiency and 2. to promote equity.
• Principle 8. An economy's standard of living depends on its ability to produce goods and services. There are different living standards and incomes around the world
• Principle 9. Prices rise when the government prints too much money  inflation
• Principle 10. Society faces a short-run trade-off between inflation and unemployment When the government increases the amount of money in the economy, inflation occurs. But another result (at the short run) is a lower level of unemployment. The curve that illustrates this short-run trade off between inflation and unemployment is called the Phillips curve.
• Competitive market market in which there are many buyers and sellers so that each has a negligible impact on the market price
• Perfectly competitive (1) The goods are being offered for sale are all the same (homogenous), (2) the buyers and sellers can not influence the market price, (3) the buyers have no to preference between sellers, (4) buyers and sellers must accept the market price they are price takers. 
• Monopoly:  a firm that is the sole seller of a product without close substitutes. There is one seller, who determines the price.
• Oligopoly: Not many competition, a few sellers offer similar or identical products, and dominate together the market.
• Monopolistically/imperfectly competitive: Many sellers, but they are offering different products. Because the products are not the same, the seller has some influence on the price for its own product. (Magazines) 
• Quantity demanded:  the amount of a good that buyers are willing and able to purchase.
• Demand schedule shows the relationship between the price of a good and the quantity

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