Key Economic Ideas PDF

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Note Summary on key economic ideas. key...

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Three Key Economic Ideas: 1. People are rational: Economists generally assume that people are rational. People make decisions and take the actions that they believe will make them happy. People consider the costs and benefits of something and only do the things with more benefit than cost. 2. People respond to incentives: Economists emphasize that consumers and firms consistently respond to economic incentives. 3. Optimal decisions are made at the margin: Economics is referred to as the marginal science because of the way economists think about decisions. When making a decision you have to look at the marginal benefit and marginal cost. Do more of any activity with a marginal benefit greater than the marginal cost....