The twelve principles of economics

1. People Face Trade-Offs: Every choice has an opportunity cost, regardless of how small the decision is. People must constantly consider the costs and benefits of each decision.

2. The Cost of Something Is What You Give Up To Get It: Making a choice always involves a sacrifice of something else, it doesn't matter how small it may be. People must constantly weigh the costs and benefits of decisions.

3. Rational People Think at the Margin: Rational people make decisions by assessing the marginal costs and marginal benefits, in other words, the additional or incremental cost or benefit of an additional unit of a good or service.

4. People Respond To Incentives: People are motivated by incentives, such as prices, profit, and income.

5. Trade Can Make Everyone Better Off: People can increase their utility by participating in voluntary exchanges whereby both parties benefit.

6. Markets Are Usually a Good Way to Organize Economic Activity: In an efficient market, prices adjust to bring supply and demand into equilibrium resulting in an efficient allocation of resources.

7. Governments Can Sometimes Improve Market Outcomes: government intervention can improve market outcomes, such as providing public goods and regulating certain actions.

8. A Country’s Standard of Living Depends on Its Ability To Produce Goods and Services: A nation's output of goods and services determines its standard of living. An economy's productivity increases when its workforce is well-educated, healthy and has access to technology.

9. Prices Rise When the Government Prints Too Much Money: Inflation occurs when the government prints too much money and causes prices to rise.

10. Society Faces a Short-Run Tradeoff Between Inflation and Unemployment: When the economy is below its potential GDP, increasing the money supply can reduce unemployment, but it can also cause inflation.

11. People Care about Relative Income: People tend to care more about their relative income, or income compared to others, than their absolute income, or their actual income.

12. Investment in Human Capital and New Technology are Keys to Long-Run Growth: A nation's income over the long run depends on investment in human capital and technology.

1. People/society faces trade-offs 2. The cost of something is what you give up to get it 3. People make decisions at the margin 4. People respond to incentives 5. Gains from trade 6. Markets move towards equilibrium 7. Resources should be used efficiently 8. Markets tend toward efficiency 9. When markets do not achieve efficiency, governments intervene 10. one person's spending is another's income 11. Spending and production capacity may not be in equilibrium 12. government policies change spending