Question

Name and describe one of the Ten Principles of Economies.

Answer 1

People face trade-offs- There is no such thing as a free lunch to get one we want, we normally have to give up another we prefer. Decision making requires trading one goal for another. Examples include how students invest their time, how a family chooses to spend their money, how government spends taxes, and how legislation can protect the environment at a cost to owners of companies. The trade-off between efficiency and equality is one particular example of a trade-off. Definition of efficiency: society's property gets the full value from its finite resources.
Definition of equality: the property in which economic wealth is equally distributed among the members of society.

Tax paid by wealthy people , for example, and then distributed to the poor, may increase equality but decrease the incentive for hard work and thus reduce the amount of production our resources produce. This means that the cost of this increased equality is a decrease in our resource efficiency. Recognizing that there are trade-offs does not mean what choices are to or should be made.

To understand that people face trade-offs does not tell us by itself what decisions They 're going to or will make. A student should not leave the psychology study solely because doing so would maximize the time available for the economics test. Society should not stop protecting the environment simply because environmental regulations reduce our standard of living in material matters. The poor should not be ignored simply because aiding them distorts incentives to work. Nevertheless, understanding the tradeoffs of life is crucial, as people are likely to make good choices only if they consider the options they have at their fingertips.