1. i. Principle one has to do with allocating time because it has to do with Tradeoffs. Someone could decide to sleep longer, but then they wouldn’t have had as much time to study. This is also called opportunity cost, the opportunity cost is the price of the thing that you are giving up. ii. a. Scarcity: Scarcity is when there is a shortage of a good or a want. b. Efficiency: Is how well an item is produced. This is best with little waste or expense. c. Equality: distributing economic prosperity equally among everyone. d. Opportunity Cost: something that must be given up to get something else. e. Marginal Change: a small adjustment to a plan. f. Externality: the impact of one person’s actions on someone else. g. Productivity: The amount of goods or services produced. h. Incentives: Something that controls how a person will act. i. Property Rights: The ability of someone to own scarce items.

2. i. Inflation is the increase in the prices in the economy. The cause of inflation is the Government prints too much money, therefore there is a lot more money out there so prices rise. ii. The short-term trade-off between inflation and unemployment is the government spends more money (stimulus) which increases the demand for goods and services. The higher demand makes businesses raise their prices, but it also makes them hire more workers to help with the demand. The more people that are hired, the lower unemployment percentages. 3. Absolute advantage is when one company produces a good using less inputs than another company. Comparative advantage is when one company can produce a product with a lower opportunity cost that the other company. 4. Comparative advantage is more important for trade. It takes in both the idea of time and if it makes sense for that person to make a good when they can make something