ECONOMICS AND ITS PRINCIPLES

Basic Principles applies for both Macro Economics as well as Micro Economics.

Principles:-

a) People face trade-offs
In life nothing comes for free. The basic fundamental is that if someone wants to get something, then he/she needs to do sacrifice on another thing of his/her like. Making decisions requires trading off one goal against another. It can resolved by Cost Benefit Analysis.

b) The cost of something is what you give up to get it
People face trade-offs, making decisions requires comparing the costs and benefits of alternative courses of action.

c) Rational people think at the margin
People want to get most of the benefits as possible, so they want to utilize the resources fully.
Let us assume that 50 people are in the waiting list of a sleeper class in a train but the sleeper class in that train is full. There is about 10 vacant seat at the tier 3 of the same train so 10 out of 50 will be moved to that vacant seats. As with the same fare they will get the best service of the tier 3 class by which some profit might be earned by the railways.

d) People respond to Incentives
In today's world desire for more makes us live a life of scarcity.
Market is a place where interaction occurs. For example- An agent desires resources(buyers) and another agent provide resources(sellers). So here we can see interactions occurs between buyers and sellers.
Another example is that when an agent is willing to provide resources ask for incentives. These incentives can be monetary or non-monetary.
Incentive driving buyers(Ib) and Incentive driving sellers(Is) is inversely proportional to price and quantity.