CHAPTER: TEN PRINCIPLES OF ECONOMICS



CHAPTER: TEN PRINCIPLES OF ECONOMICS

As you begin your first course in economics, you might ask, “Why does economics matter?” Well, it matters for many reasons. For one, the state of the economy has a huge impact on the well-being of everyone who lives in our society.

Here’s an example. You may know someone who’s lost a job or hasn’t been able to find one. It’s likely that his or her circumstances are a bit strained. This is no surprise: Both for an individual and for the economy as a whole, more unemployment is associated with lower income.

The issue is not just one of material well-being, however. Researchers have shown that the stress and strain of unemployment also makes other social problems worse--problems such as crime, homelessness, and domestic violence. The study of economics can help. By understanding why unemployment exists, and what policies might reduce it, we can alleviate these and other social ills.

Economics also matters because it helps us make better decisions. Should you take a job after college or go to graduate school? When you’re working, how much should you save for your retirement? If you’re running your own business, how many workers should you hire, and what prices should you charge for your products? Economics provides insights that can help you make such decisions.

Finally, studying economics makes us more astute voters. Someday you may hear candidates for mayor debate the issue of rent control, or candidates for president debate the issue of international trade. Whatever the topic of the day, economics gives us the tools to make more informed choices.

Alfred Marshall, who wrote one of the first economics textbooks, said, “economics is a study of mankind in the ordinary business of life.” That’s a great definition. As you read the chapters ahead, you may be surprised where that study takes us.

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