Isra’a El-RifaiNiloufar EntekhabiJournalsWeek 1: Principle 1People Face Tradeoffs.This week we started off with the 10 commandments. These include people face trade offs whichis the exchange of time usually. this then leads to the cost of something is what you give upgetting something else, generally defined by the following equation: cost= loss=opportunitycost= direct cost (time value) + indirect cost (money). Then, rational people think at the marginbased on a period of time and by considering the edge/constraints. People after respond toincentives which are motivators just like the carrot and the stick strategy. Trade off can makeeveryone happy by importing and exporting products, Markets profit from that which leads to the6thprinciple: markets are usually a good way to organize economic activity, which then could beimproved by governments by weighing quantity and price factors. this has an effect on citizen’sstandard way of living, leading sometimes to inflations where the government print too muchmoney losing its value. Adjusting the prices due to inflations usually takes a lot of time which isa cause of unemployment. I chose to speak about the first principle: this principle defines theterms economy, scarcity, efficiency and equity. Economy is basically the study of how societymanages its scarce resources. Scarcity is the limited nature of society’s resources. Efficiency isthe property of society getting the most it can from its scarce resources and equity is the propertyof distributing economic prosperity fairly among the members of society. Trade offs aregenerally known as the exchange of time or money and it generally leads people to makedecisions. A perfect example is the guns and butter one written in the textbook. It describes howthe more money that is spent on national defense to protect the society from foreign aggressors
(in this case guns), the less the members of the society can spend on goods in order to raise ourstandard living (in this case butter). An example in my daily life that reflect this principle iswork. When I take a day off from work in order to study or go out with friends or simply relaxbecause I am sick, I gain the opportunity of relaxing and doing my important things. However, Ilose the money that I could’ve done during that shift.Week 2: Normative vs Positive analysisThis week we distinguished between the two types of analysis, normative economics which isdefined by the analysis based on judgments made about what ought to be, our moral, our values,our ethics. And positive economics defined as the analysis that can be tested by observing thefacts, statistics, tests. we also learned the difference between a communist and capitalist system.