“The Economic Principle”
> Explanatory Article by Marios Kyriakou, MSc Economics
About the author: Marios Kyriakou has a bachelor’s degree in Economics from the University of Cyprus and a master’s degree in Economics from the University of Warwick. He is also a holder of CySEC’s Advanced Certificate in Financial Services Legal Framework and a professional in Online Trading, Forex and CFDs with more than 7 years of experience.
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<Last updated 13.04.2020>
Hi! If you are interested in Economics, I’ve prepared the below to help your understanding about logic and rationality. You should take a look at this short article where I explain the Economic Principle. In other words, how people behave in order to serve their best interests.
Our ancient ancestors have discovered how to express logic with mathematics a long time ago. Due to the fact that most people are acting based on logic and rationality a principle emerged in the area of Economics. The idea is that a rational individual would prefer to have more than less and to gain more by sacrificing as less as possible.
This preference of a rational person, based on logic, to gain the highest benefit at the lowest cost is the Economic Principle, an axiom, a law that often holds and helps us in explaining the behavior of most people in the economy. We have seen that decisions have to be taken given the limited resources available. The key is to determine what would be the right choice. Every human being, organization, government and other economic agents, must take into account the costs and benefits related to any economic activity.
Due to the scarcity of the means necessary to satisfy people’s needs they must choose the best possible use of the available resources. This means that every economic activity must pursue the best possible outcome with the lowest possible cost, or (economic) means.
A consumer would want to satisfy as more needs and wants as possible with the best way and with the lowest expenditure, or trade-off, as possible. A producer targets the highest production, or output, and profit preferably with the lowest use of capital and the lower cost possible.
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