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Transcript of 10 people
10 Principles of
1.People Face Tradeoffs.
2. The Cost of Something is What You Give Up to Get It.
3. Rational People Think at the Margin.
5.Trade Can Make Everyone Better Off.
4.People Respond to Incentives.
Behavior changes when costs or benefits change.
6. Markets Are Usually a Good Way to Organize Economic Activity.
7. Governments Can Sometimes Improve Market Outcomes.
To get one thing, you have to give up something else. Making decisions requires trading off one goal against another.
Example..... the margin of economics. There is always a decision to make.
Decision makes have to consider both the obvious and implicit costs of their actions.
Example.......Nothing is free in life. To gain sumthin ,you must give up something
ex. to get good grades ,yu must give up time to study
ex.2 to lose weight , must give up unhealthy food.
Decision maker takes action if and only if the marginal benefit of the action exceeds the marginal cost. A marginal change is a small adjustment to an existing plan of action.
Example: If i go to mcdonalds and i only have 4dollars, ima think at the margin and buy from the dollar menu. i dont have to buy the expensive meal to get the same thing that will do the same.
One obvious source of incentives is the price of
goods and services.
Example: A positive incentive would be coupons from mcdonalds. It will make yu wanna go.
By trading with others, people can buy a greater variety of goods or services.
Example: If i have a pair of bred 4's and my friend has some sketchers that have always wanted and i cant find them where i live then i trade with him and we all win cuz its w.e. we both wanted. (no matter the cost diffrence)
Households and firms that interact in market economies act as if they are guided by an "invisible hand" that leads the market to allocate resorces.
Example: The market is a good way to organize your resources and make money.
Governments Can Sometimes Improve Market Outcomes.
When a market fails to allocate resources efficiently, the government can change the outcome through public policy, regulations against monopolies and pollution.
example: mmmmm an example of this would be the health department. the government helps yu / forces yu to antain a clean store which benefits buisness
8. A Country's Standard of Living Depends on Its Ability to Produce Goods and Services
Example: until second century, the use of horseshoe was not that popular, however, the productivity of the agriculture by letting horses to bigger plots of field despite any pain. Thus, the advancement in production promoted farmers to grow more as well as to harvest more and successively increasing the surplus. The goods can be sold at lower prices yet yielding larger profits thereby enhancing the standard.
When large quantity of national money is created; the worthiness of money falls on account of which price rises requiring more money to buy goods and services.
Example: when mcdonalds first came out, hamburgurs were only 15 cents but that was in the 1950's. now that we have a bigger population and we printing more money, the price of it has gone up. Btw comics were only 10cents back then.
9.Prices Rise When the Government Prints Too Much Money.
Reducing inflation often causes a temporary rise in unemployment. This tradeoff is crucial for understanding the short-run effects of changes in taxes,government spending and monetary policy. short run tradeoff between unemployment & inflation .
Example: An increase in the amount of money in the economy stimulates spending and increases the demand of goods and services in the economy.
Higher demand may overtime cause firms to raise their prices but in the meantime, it also encourages them to increase the quantity of goods and services they produce and to hire more workers to produce those goods and services. More hiring means lower unemployment.
10. Society Faces a Short-Run Tradeoff Between Inflation and Unemployment.
Nicholas Gregory Mankiws
N. Gregory Mankiw was born in feb.3,1958 now he is a Professor of Economics at Harvard University.