Key Principles of Economics

Topics: Economics, Cost, Price Pages: 4 (1253 words) Published: April 21, 2013
3 Key Elements of Economics

There are many key factors that make up the economic system all which must work together in order to effectively direct scarce inputs into wanted outputs. For this purpose the focus will be on 3 of those key elements. this includes the idea of no such thing as a free lunch, transactions as an obstacle to trade, and how the invisible hand directs buyers and sellers toward activities that increase general welfare. All three of these elements are essential for a greater understanding of how the economy thrives.

In our market, resources are limited yet humans desire for goods and services is nearly infinite. Because of this there is no such thing as a free lunch. The sacrifice most commonly thought of in receiving lunch is the monetary cost however there are other sacrifices as well. Productivity, which provides the money for that lunch, is a large sacrifice when we stop to take a lunch break as in this explanation. However, the main sacrifice to focus on is the cost that we pay for any good or service. This sacrifice is something both consumers and producers must face. To say that you did not pay for the lunch you received still does not make it free to you or the person who paid the bill. It simply shifts the cost, it does not reduce it.

As consumers we are always looking to get more for less. Yet what we do not see so directly, is how the cost of any given good influences us on what we choose to purchase. With out comparing the cost advantage of given products we as consumers would end up using the money we had intended for groceries perhaps on other items that are not of equal value. Therefore, if Sally goes out shopping with the intent of buying only a few essential items that her daughter will need for the winter weather and does not consider the cost of what she is buying she could easily over spend and have to sacrifice at the grocery store. Or maybe Sally will then not be able to heat her house effectively. Both of these...
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