Chapter 1 - Mankiw Chapter 1 TEN PRINCIPLES OF ECONOMICS...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Mankiw Chapter 1                   LEARNING OBJECTIVES:   By the end of this chapter, students should understand:   Ø that economics is about the allocation of scarce resources.   Ø that individuals face tradeoffs. Ø the meaning of opportunity cost.   Ø how to use marginal reasoning when making decisions. TEN PRINCIPLES OF ECONOMICS
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
  Ø how incentives affect people’s behavior.   Ø why trade among people or nations can be good for everyone.   Ø why markets are a good, but not perfect, way to allocate resources.   Ø what determines some trends in the overall economy.       CONTEXT AND PURPOSE:   Chapter 1 is the first chapter in a three-chapter section that serves as the introduction to the text. Chapter 1 introduces ten fundamental principles on which the study of economics is based. In a broad sense, the rest of the text is an elaboration on these ten principles. Chapter 2 will develop how economists approach problems while Chapter 3 will explain how individuals and countries gain from trade. The purpose of Chapter 1 is to lay out ten economic principles that will serve as building blocks for the rest of the text. The ten principles can be grouped into three categories: how people make decisions, how people interact, and how the economy works as a whole. Throughout the text, references will be made repeatedly to these ten principles.       KEY POINTS:   1.       The fundamental lessons about individual decisionmaking are that people face tradeoffs among alternative  goals, that the cost of any action is measured in terms of forgone opportunities, that rational people make  decisions by comparing marginal costs and marginal benefits, and that people change their behavior in response  to the incentives they face.
Background image of page 2
  2.       The fundamental lessons about interactions among people are that trade can be mutually beneficial, that  markets are usually a good way of coordinating trades among people, and that the government can potentially  improve market outcomes if there is some sort of market failure or if the market outcome is inequitable.   3.       The fundamental lessons about the economy as a whole are that productivity is the ultimate source of living  standards, that money growth is the ultimate source of inflation, and that society faces a short-run tradeoff between  inflation and unemployment.       CHAPTER OUTLINE:   I.          Introduction     A.         The word “economy” comes from the Greek word meaning “one who manages a household.”   B.         This makes some sense since in the economy we are faced with many decisions (just as a  household is).  
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/08/2010 for the course ECON econ100 taught by Professor Miriam during the Spring '09 term at École Normale Supérieure.

Page1 / 11

Chapter 1 - Mankiw Chapter 1 TEN PRINCIPLES OF ECONOMICS...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online