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EC 151 Ch 1 - EC 151 Ch 1 10 Principles of Economics...

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Unformatted text preview: EC 151 Ch: 1 10 Principles of Economics Introduction to 10 principles of Introduction to 10 principles of economics Economics: What is economics? Are you confronted by economics? Scarce Resources Definition of Economics What do economists study? how people make decisions how people interact analyze how forces & trends affect economy as a whole How People Make Decisions: Principle # 1: People Face tradeoffs no such thing as "free lunch" classical tradeoff tradeoff between efficiency & Equity Principle # 2: Cost of something is what you give up to get it opportunity cost Principle # 3: Rational people think on a margin marginal benefits vs. marginal costs Principle # 4: People respond to incentives comparing costs and benefits direct & indirect effects of incentives How people interact? Principle # 5: Trade can make everyone better off specialization more goods available at lower P Principle # 6: Markets are usually a good way to organize economic activity market economy "invisible hand" Principle # 7: Gov't can sometimes improve market outcomes gov't intervention: promote efficiency or promote equity market failure: externality market power How The economy as a whole works? Principle # 8: A country's standard of living depends on its ability to produce goods & services productivity increase in productivity = increase in standard of living Principle # 9: P increases when gov't prints too much money inflation Principle # 10: Society faces SR tradeoff between inflation and unemployment Phillips curve Business cycle ...
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