10 Economic Principles Everyone Should Know

Economics can be a difficult subject to learn, so it’s no surprise that many students are intimidated by economics classes in high school and college. But at it’s core, economics is the study of how humans interact with value. Economics studies what people value and how their values influence their actions.

The first economic principle is that incentives matter. People will make choices based upon the incentives that exist.

We often think of monetary incentives as primary drivers of decision-making, but other incentives matter too. Fame, power, love, reputation, and sex are all important incentives that shape how people act.

People are self-interested and will act in ways that are most beneficial to them. This doesn’t mean that people are always selfish; in fact, one of the common misinterpretations of this principle is that we forget the distinction between being self-interested and selfish.

One important principle in economics is opportunity cost, which we can think of as the value of an opportunity that is lost when another opportunity is chosen. As humans, we have a finite amount of…

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