Basic Economic Principles
These deal with how people make decisions, how people interact, and how aggregates (i.e. the economy) work.
People face trade-offs. The decisions we make in the presence of scarcity displays a lot about what we value. Also, nothing is free. There ain't no such thing as a free lunch because resources are always used in the production of things. Therefore, nothing on earth is free. This is why it's possible to have too much of a good thing--we have to endure a cost whenever we trade off. A cost is anything that consumes resources.
Taxes aren't costs! No resources are consumed by cutting taxes, and allowing people to keep more of their income. What would be a cost, however, is if the government had to spend more in order to collect more taxes later to replace the deficit of funds created by cutting taxes.
Opportunity Cost: the net value/benefit from/of your next best opportunity; compares value and cost; net pleasure of your next best opportunity
Hypothetical Situation of the Century
Suppose you win Bruce Springsteen tickets. You can't resell them, and your only other option for entertainment other than Springsteen is Barry Manilow. The cost of the latter concert is $40, however, you would get $50 worth of enjoyment from the Manilow concert. What is your opportunity cost?
Answer: $10 for your next best option instead of seeing Bruce Springsteen. This is because the monetary cost of the Barry Manilow concert is ten dollar less than what you would be willing to pay to see him.
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