Greg Mankiw, Harvard professor, noted author and macroeconomist, and former chief economic advisor to the president, introduces his students to economics through the following 10 principles. These principles are the foundation for everything taught in his introductory courses. They are divided into three different categories: how people make decisions, how people interact, and how the economy as a whole works. We will use these also as the foundation of our course.
How People Make Decisions
Principle #1: People Face Trade-offs
Principle #2: The Cost of Something Is What You Give Up to Get It
Principle #3: Rational People Think at the Margin
Principle #4: People Respond to Incentives
How People Interact
Principle #5: Trade Can Make Everyone Better Off
Principle #6: Markets Are Usually a Good Way to Organize Economic Activity
Principle #7: Governments Can Sometimes Improve Market Outcomes
How the Economy as a Whole Works
Principle #8: A Country’s Standard of Living Depends on Its Ability to Produce Goods and Services
Principle #9: Prices Rise When the Government Prints Too Much Money
Principle #10: Society Faces a Short-Run Trade-off between Inflation and Unemployment
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