Principles.

• Tradeoffs - to acquire one product, a consumer has to give up an alternative, for example choosing between leisure and work.
• Opportunity - the value of the foregone option is the opportunity cost. Consumers seek to minimize opportunity cost in purchases.
• Marginal principle- consumers will only pick options whose marginal benefit surpasses the marginal cost.
• Incentives- consumers are sensitive to incentives such as product offers and discounts.
• Trade- everyone stands to gain by specializing according to their comparative and absolute advantages. Consumers will produce what they enjoy comparative and absolute benefits in surplus and trade to acquire those in deficits.
• The economy is best organized by markets- the interactions between producers and consumers determine what goods are to be produced and the prices.
• Production determines the standards of living- the higher the production of goods and services, the higher the standards of living. Increased supply leads to reduced prices and therefore increases purchases. The higher the output consumed, the higher the living standards.
• Printing of currency causes inflation- if a government prints more money not matched by increased output, the prices of goods increase, reducing demand.
• In the short-run, inflation reduces unemployment- as demonstrated by the Philips curve, an increase in inflation reduces unemployment levels. This increases the purchasing power in the economy, raising the level of purchases.