Summary
Essential Laws of Economics | A Brief Summary
- Course
- Economics
- Institution
- New York University
A summary of laws of economics arranged categorically.
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EssentialEconomics
Laws
The Foundations of
Market Behavior and
Global Finance
, A. Basic Economic Laws
1. Law of Demand: States that, all else being equal, as the
price of a good increases, the quantity demanded decreases,
and vice versa.
2. Law of Supply: States that, all else being equal, as the
price of a good increases, the quantity supplied increases,
and vice versa.
3. Law of Diminishing Marginal Utility: As a consumer
consumes more units of a good, the additional satisfaction
(utility) from each additional unit decreases.
4. Law of Diminishing Returns: In production, adding more
of a variable input (like labor) to a fixed input (like capital)
will eventually result in smaller increases in output.
5. Law of Comparative Advantage: Countries (or
individuals) will benefit by specializing in the production of
goods for which they have a comparative advantage and
trading for others.
6. Law of Absolute Advantage: Countries (or individuals)
should produce goods for which they are the most efficient
(i.e., where they can produce more output with the same
input).
B. Laws in Microeconomics
1. Gresham’s Law: Bad money (currency of lesser value)
drives out good money (currency of higher value) when both
are in circulation.
2. Say’s Law: Supply creates its own demand, meaning
production is the source of demand in the economy.
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