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Bibliography

and Refereces.

10 Principles of

Economics

Principle # 3

Rational People Think

At The Margin

  • N. Gregory Mankiw (2006). Principles of Economics, 4th Edition. South-Western College Pub.

Principle # 2

The Cost of Something is What You Give Up to Get It

Principle #4

People Respond to Incentives

Rational people systematically do the best they can to achieve their objectives. Marginal changes are incremental changes to an existing plan. Rational decision makers only proceed with an action if the marginal benefit exceeds the marginal cost.

The Opportunity cost of an item is the value of the next best alternative not taken for having that item.

An incentive is something that induces a person to act. Because rational people weigh marginal costs and marginal benefits of activities, they will respond when these costs or benefits change

For example, an airline charges $1000 for a seat, and the actual cost of that seat is $500. The plane is about to tke off. A person is willing to pay $300 for a seat that is currently empty. Should the airline sell the ticket? Of course they should, because it is also income, and for as long as that income doesn't produce any loss, but profit, it should be taken

An example of an opportunity cost, is the one in which a person decides to attend to college, even thought it may have had the chance to play basketball at a high profit. The opportunity cost is the value of the second best thing he didn't do, in this case, playing basketball

by Diego López - 10°A

For example, when the price of automobiles rises, buyers have an incentive to buy fewer cars while automobile producers have an incentive to hire more workers and produce more autos.

  • "Principles of Economics". Web Site "Transtutors". Entrance Date: 11 July, 2012. Consult Date: 05 November, 2012.

URL:http://www.transtutors.com/homework-help/micro-economics/principles

Principle #1

People Face Trade-Off's

Facing a trade-off is facing multiple options of what can be done with limited resources.

PART II:

HOW PEOPLE INTERACT

The Classical example of a trade-off is that between butter and guns. This is the possibility to spend on consumer goods (Butter) or national defense (guns).

The most evident example of a trade-off is that between EQUALITY and EFFICIENCY

Principle # 5

Trade Can Make Everyone Better Off

Social Sciences

PART I:

HOW PEOPLE MAKE DESISIONS

Study the behavior

of individuals and societies

Trade allows people to specialize on a particular job according to their ability and preferences. They can then trade their goods and services produced for other goods and services

Principle # 6

Markets are usually a good way to organize economic activity

Principle # 10

Society faces a short run tradeoff between inflation and unemployment

In a market economy, decisions are made by thousands of firms and households. Firms decide who to hire, and households decide where to work and what to buy.

Increasing the quantity of money causes inflation, therefore it looses value. But more money means more purchase, which means more demand, which means more hiring.

Economy

Principle # 7

Governments can sometimes improve market outcomes

Principle # 9

Prices rise when the government prints too much money

Government interferes in market whenever there is a market failure, which can be an issue on the efficiency or equality.

Studies the behavior of individuals and societies concerning how they make decisions facing the scarce resources

The phenomena of inflation occurs when the government prints too much money and the reaction will always be the devaluation of said money

Principle # 8

A country’s Standard of living depends on the ability to produce goods and services

PART III:

HOW THE ECONOMY AS A WHOLE WORKS

10 Principles

of Economics

A nation´s economic prosperity depends on the productivity of the country's individuals. This is the number of goods and services produced.

The

End!

As planted by Gregory Mankiw on

"Principles of Economics"

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