Business, Legal & Accounting Glossary
Economic principles are guiding rules of the discipline of economics. There are several areas that come under the domain of economic principles like economic decisions, working of economy, and popular interaction.
There are certain economic principles that govern economic decision-making processes of people. The principle of trade-off, for example, states that people have to give up something in order to get something else. This function needs people to trade off a particular goal against another one. Decision-makers, as per economic principles, also need to weigh factors like costs involved. An important economic principle also states that rational people make an economic decision provided the marginal benefit is higher than the marginal cost.
There are a few economic principles that are important as far as functioning of economies are concerned. A major economic principle states that trade is useful for the betterment of the overall quality of economic activity and standards of products and goods available in an economy. It is also opined that markets help in proper organization of economic activities in a particular region. As per economic principles, it is possible for governments to play an active role in increasing market returns.
Another major economic principle is that standard of living in a particular country is connected to the ability of that country to generate services and goods. It is observed that prices of goods and services go up in case government prints more money than what is necessary. There are a few occasions when a society experiences a trade-off in the short-run between unemployment and inflation.
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This glossary post was last updated: 29th March, 2020 | 92 Views.