Nine
Principles
of
Economic
Thinking
National Council for Economic Education (NCEE)
Nine Principles of Economic Thinking
 Everything has a cost
…your lunch in the cafeteria,
of course, but think about
what you give up to have that
lunch —study for test at last
hour, a date with your
girlfriend, etc.
Nine Principles of Economic Thinking
 People choose for good reasons
… you choose to gain benefit
that is your own self-interest. A
choice overcomes your hunger,
gives you a better grade, or an
enjoyable time with your
girlfriend.
Nine Principles of Economic Thinking
 Incentives matter
… the chance to get a good grade in
AP Economics is what drives you to
work hard, but working hard also
brings the reward of being
admitted to a good college.
Nine Principles of Economic Thinking
 Economic actions carry
secondary effects
… if you give up your lunch and
spend more money on the date
with your girlfriend this week,
the secondary effect of that
action is to impress her and have
a date for the prom!
Nine Principles of Economic Thinking
 People gain from voluntary trade
… both parties win in trade;
I give up cash and the
grocery store gives me food
for my family.
Nine Principles of Economic Thinking
 Economic Thinking…
is marginal thinking.
… the extra benefits of an
action must be in line with the
extra cost of taking that action.
This is called “thinking on the
margin”.
Nine Principles of Economic Thinking
 The price of a good or service is
affected by people’s choice.
… demand and supply are forces in
the market that determine price;
when there is more demanded than
supplied, the price will rise; when
there is less demanded than
supplied, the price will decrease.
Nine Principles of Economic Thinking
 People create economic systems to
influence choice and incentives
… an economic system is an
institutional idea that sets the method
by which the basic economic
questions are answered—What to
produce? How to produce? For
whom to produce? When to change?
Nine Principles of Economic Thinking
 The test of a theory is its ability to
predict
What is Economics?
It is the study of how a society is able to
satisfy the greatest needs and wants with the
limited resources available. Economists,
therefore, engage in a form of the Scientific
Process—observation, hypothesize, test,
theorize, and lastly solve problems.
Solving problems make is easier if the
theory is predictive.
AP Economics introduces a way of
thinking and a set of terms that are likely
to be different from what other courses you
have taken in the Social Science field.
The mastery of the “economic way of
thinking” and the internalization of the
economic terminology is a major step in
gaining an understanding of the concepts
and ideas of AP Economics.