,Chapter 1 : 10 Principles of Economics
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Economics 15 a study of how people manage Its scarce resources. Scarce means limited resources
-
Most society , resources are allocated through the combine choices of millions of household and industries. Economists observe how people manage scarcity
.
A . HOW PEOPLE MAKE DESICIONS
1. People face trade off :
↳ To thing you you would have to something.
get one want ,
give up
2X : -a Student face trade off between hersleep time and study time, or her
study time between calculus and microeconomics.
-
Parents deciding trade off between fancy dinner and daily necessities.
Guns and between
Country trade off military goods
-
butter ,
or .
Clean environment efficiency of productivity
-
and
↳ There are pollutions regulation which can be a disadvantage to productivity which is a tradeoff (If you want clean environment , productivity decreatest
Efficiency and equality
-
Efficiency : How society get the most profit fromIts scarce resources
Equality : How society divide the resources
↳ Welfare and unemployment Insurance make people less hardworking hence , Shrinking the economics pie .
,2
. The cost of something it what you give It up .
4 Related to the first principle ,
because of the trade off people need to think the benefit and cost of their decision .
Opportunity cost :
Something that must be given op to obtain some Item (alternate decision that people can dol
ex :
Attending College opportunting costis how much wages can we get if we go to work instead of college.
College athlete who can earn millions if they work full time athlete.
.
3
Rational people think at the margin
Rational people : People who systematically do their best to reach their objectives·
Marginal Change : Incramental Change of a plan of an action
↳ Small changes people do to things they already do
eX :
A factory is producing 100 products ,
How they plan to add It to 101 .
Marginal cost : Additional cost of producing extra unt.
Marginal benefit : Additional benefit .
ex :
Paying netflix 301 amonth . Usually 5 movies a month. Marginal cost :
nothing ,
not money but time .
Marginal benefit : entertainment
.
Rational people take action if marginal benefit >
Marginal cost.
, 4) People respond to incentive
Incentives : an act that induces someone to do something.
↳ As the price of apple rices , people would eat fewer .
↳ Higher price induces company to produce more .
Public policymaker need to Policies cost of benefit and alter people's behavior .
pay attention . can change
B .
HOW PEOPLE INTERACT
Trade off
everyone better .
5
. can make
↳ Trade between countries can make both better off Trade allows country to specialize in what they do best and enjoy greater variety of goods.
country .
6
. Marker are usually a good way to organize economics activity.
Market economy : an
economy that allocatedIts resources through the decentralized decisions of household and firms.
↳ In market economy central planner
,
are replaced by millions of firms and households,
Adam Smith : Market economy is guided by an invisible hand which are prices.
Sellers look how much to
supply and buyers to demand . As a result , prices reflect both sellers cost and buyers value·
↳ Corollary : When government prevents prices from the equilibrium .
It impedes invisible hand .
-
Economics 15 a study of how people manage Its scarce resources. Scarce means limited resources
-
Most society , resources are allocated through the combine choices of millions of household and industries. Economists observe how people manage scarcity
.
A . HOW PEOPLE MAKE DESICIONS
1. People face trade off :
↳ To thing you you would have to something.
get one want ,
give up
2X : -a Student face trade off between hersleep time and study time, or her
study time between calculus and microeconomics.
-
Parents deciding trade off between fancy dinner and daily necessities.
Guns and between
Country trade off military goods
-
butter ,
or .
Clean environment efficiency of productivity
-
and
↳ There are pollutions regulation which can be a disadvantage to productivity which is a tradeoff (If you want clean environment , productivity decreatest
Efficiency and equality
-
Efficiency : How society get the most profit fromIts scarce resources
Equality : How society divide the resources
↳ Welfare and unemployment Insurance make people less hardworking hence , Shrinking the economics pie .
,2
. The cost of something it what you give It up .
4 Related to the first principle ,
because of the trade off people need to think the benefit and cost of their decision .
Opportunity cost :
Something that must be given op to obtain some Item (alternate decision that people can dol
ex :
Attending College opportunting costis how much wages can we get if we go to work instead of college.
College athlete who can earn millions if they work full time athlete.
.
3
Rational people think at the margin
Rational people : People who systematically do their best to reach their objectives·
Marginal Change : Incramental Change of a plan of an action
↳ Small changes people do to things they already do
eX :
A factory is producing 100 products ,
How they plan to add It to 101 .
Marginal cost : Additional cost of producing extra unt.
Marginal benefit : Additional benefit .
ex :
Paying netflix 301 amonth . Usually 5 movies a month. Marginal cost :
nothing ,
not money but time .
Marginal benefit : entertainment
.
Rational people take action if marginal benefit >
Marginal cost.
, 4) People respond to incentive
Incentives : an act that induces someone to do something.
↳ As the price of apple rices , people would eat fewer .
↳ Higher price induces company to produce more .
Public policymaker need to Policies cost of benefit and alter people's behavior .
pay attention . can change
B .
HOW PEOPLE INTERACT
Trade off
everyone better .
5
. can make
↳ Trade between countries can make both better off Trade allows country to specialize in what they do best and enjoy greater variety of goods.
country .
6
. Marker are usually a good way to organize economics activity.
Market economy : an
economy that allocatedIts resources through the decentralized decisions of household and firms.
↳ In market economy central planner
,
are replaced by millions of firms and households,
Adam Smith : Market economy is guided by an invisible hand which are prices.
Sellers look how much to
supply and buyers to demand . As a result , prices reflect both sellers cost and buyers value·
↳ Corollary : When government prevents prices from the equilibrium .
It impedes invisible hand .
