The Seven Core Principles of Economics

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Economics is the social science that deals with the production, distribution, and consumption of goods and services and with the theory and management of economies or economic systems. All economists agree on one thing, the economy is large and it is unpredictable. However, throughout the years economists have developed some simple but widely applicable principles that are useful when trying to understand decisions that are made by everyday people to the workings of highly complex markets. There are Seven Core Principles of Economics. These principles are: Scarcity Principle, Cost-Benefit Principle, Principle of Unequal Costs, Principle of Comparative Advantage, Principle of Increasing Opportunity Cost, Equilibrium Principle, and Efficiency Principle. Being familiar with these seven core principles is vital in your understanding on how economics operates.

Scarcity PrincipleThe Scarcity Principle basically states having one good thing usually means having less of another. It is one of the most basic principles of economics.

Although we have boundless needs and wants, the resources available to us are limited, there's just not enough good to go around. It basically states that there is a cost to consumption, people have unlimited wants but we have limited resources. If not for scarcity, then, there would be no need to concern ourselves with how best to manage resources. Everyone is faced with everyday decisions that involve scarcity. It doesn't matter if you are Bill Gates or a homeless man living on the streets. When we make decisions about anything, scarcity is usually taken into consideration whether we realize it or not. Gates has enough money to buy more houses, cars, boats, vacations, and basically any consumer good he wants but there will always be only twenty-four hours in a day. For Bill Gates time is most scarce for him.

In economic reasoning, scarcity is a relative concept,