PRINCIPLES OF ECONOMICS
PRINCIPLE 1 : PEOPLE FACE TRADEOFFS
To get one thing we need to loose one thing. Take an example of paper, for making papers we need to cut trees so for the sake of printing papers we are giving up on tress.
PRINCIPLE 2 : THE COST OF SOMETHING IS What YOU GIVE UP TO GET IT
People face trade offs making decisions involve comparing the costs and benefits of products while making decisions comparison of cost and benefits is necessary. opportunity cost of an item is what you give up to get that item. Example To be fit you need to give up on junk food.
PRINCIPLE 4 : PEOPLE RESPOND TO INCENTIVES
Incentive leads a person to act because rational people take decisions by comparing cost and benefits of the product. They change their decisions when there is a change in cost and benefits. It alters the buying behaviour of consumers. Incentives have a better response rate.
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