Journals - Isra’a El-Rifai Niloufar Entekhabi Journals Week...

Isra’a El-Rifai
Niloufar Entekhabi
Journals
Week 1: Principle 1  People Face Tradeoffs.
This week we started off with the 10 commandments. These include people face trade offs which
is the exchange of time usually. this then leads to the cost of something is what you give up
getting something else, generally defined by the following equation: cost= loss=opportunity
cost= direct cost (time value) + indirect cost (money). Then, rational people think at the margin
based on a period of time and by considering the edge/constraints. People after respond to
incentives which are motivators just like the carrot and the stick strategy. Trade off can make
everyone happy by importing and exporting products, Markets profit from that which leads to the
6
th
principle: markets are usually a good way to organize economic activity, which then could be
improved by governments by weighing quantity and price factors. this has an effect on citizen’s
standard way of living, leading sometimes to inflations where the government print too much
money losing its value. Adjusting the prices due to inflations usually takes a lot of time which is
a cause of unemployment. I chose to speak about the first principle: this principle defines the
terms economy, scarcity, efficiency and equity. Economy is basically the study of how society
manages its scarce resources. Scarcity is the limited nature of society’s resources. Efficiency is
the property of society getting the most it can from its scarce resources and equity is the property
of distributing economic prosperity fairly among the members of society. Trade offs are
generally known as the exchange of time or money and it generally leads people to make
decisions. A perfect example is the guns and butter one written in the textbook. It describes how
the 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 our
standard living (in this case butter). An example in my daily life that reflect this principle is
work. When I take a day off from work in order to study or go out with friends or simply relax
because I am sick, I gain the opportunity of relaxing and doing my important things. However, I
lose the money that I could’ve done during that shift.
Week 2: Normative vs Positive analysis
This week we distinguished between the two types of analysis, normative economics which is
defined 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 the
facts, statistics, tests. we also learned the difference between a communist and capitalist system.