Beruflich Dokumente
Kultur Dokumente
Fifth Edition
PRINCIPLES OF
By N. Gregory Mankiw
1
Ten Principles of Economics
Overview
Economics is a broad-ranging discipline, both in the
questions it asks and methods it uses to seek answers.
Recessions: how can we prevent/reserse economic downturns? Poverty: how can we reduce poverty domestically and internationally?
CHAPTER 1
What are the principles of how people interact? What are the principles of how the economy as a
whole works?
CHAPTER 1
CHAPTER 1
equity: Benefits are uniformly distributed among memders of a society Refers to how the economic pie is slided Example: Every household in the country has the same level of
income
CHAPTER 1
Every society must decide what it will produce with its scare resources There are many ways to produce G&S Every society must decide how it will produce its G&S
3. For whom should G&S be produced? If a good or service is produced, a decision must be made about who will get it Every society must decide how to distribute the wealth acquired from its scarce resources
CHAPTER 1 TEN PRINCIPLES OF ECONOMICS
CHAPTER 1
10
11
Principle #2: The Cost of Something Is What You Give Up to Get It The opportunity cost of any item is whatever must be
given up to obtain it.
Opportunity costs=economic costs Opportunity costs are different from accounting costs Opportunity costs of going college Tuition and fees Books Without wages
CHAPTER 1 TEN PRINCIPLES OF ECONOMICS
12
13
What does at the margin" mean in this context? Economists often speak in terms of `marginal' this
or that - Marginal product (Y/ X) - Marginal revenue (dTR/dQ) - Marginal utility - Marginal rate of substitution - Marginal rate of transformation - and on and on Rational decision makers take an action only if the marginal benefit of the action exceeds the marginal cost.
TEN PRINCIPLES OF ECONOMICS
CHAPTER 1
14
15
Example: Pho Restaurant Each Pho costs $1 The first Pho tastes delicious, and you were
hungry...definitely worth your dollar! The second Pho tastes good, but you're not so hungry anymore...still worth a dollar though The third Pho is still tasty, but you are starting to feel really full You feel ill and another Pho will put you over the edge...no way are you paying for a fourth Pho!
TEN PRINCIPLES OF ECONOMICS
CHAPTER 1
16
17
18
ACTIVE LEARNING
Exercise
1:
You are selling your 1996 Mustang. You have already spent $1000 on repairs.
At the last minute, the transmission dies. You can pay $600 to have it repaired, or sell the car as is.
In each of the following scenarios, should you have the transmission repaired?
A. Blue book value is $6500 if transmission works, $5700 if it doesnt B. Blue book value is $6000 if transmission works, $5500 if it doesnt
19
ACTIVE LEARNING
Answers
1:
Benefit of fixing the transmission = $800 ($6500 5700). Its worthwhile to have the transmission fixed.
B. Blue book value is $6000 if transmission works, $5500 if it doesnt
Benefit of fixing the transmission is only $500. Paying $600 to fix transmission is not worthwhile.
20
ACTIVE LEARNING
Answers
Observations:
1:
21
The next
three principles deal with how people interact.
CHAPTER 1
22
produce buy other goods more cheaply from abroad than could be produced at home
TEN PRINCIPLES OF ECONOMICS
CHAPTER 1
23
24
Principle #6: Markets Are Usually A Good Way to Organize Economic Activity
what goods to produce how to produce them how much of each to produce who gets them
CHAPTER 1 TEN PRINCIPLES OF ECONOMICS
25
Principle #6: Markets Are Usually A Good Way to Organize Economic Activity
CHAPTER 1
26
Principle #6: Markets Are Usually A Good Way to Organize Economic Activity
27
A restaurant wont serve meals if customers do not pay before they leave. A music company wont produce CDs if too many people avoid paying by making illegal copies.
TEN PRINCIPLES OF ECONOMICS
CHAPTER 1
28
Govt may alter market outcome to promote efficiency market failure, when the market fails to allocate
societys resources efficiently. Causes: externalities, when the production or consumption of a good affects bystanders (e.g. pollution) market power, a single buyer or seller has substantial influence on market price (e.g. monopoly)
29
Govt may alter market outcome to promote equity If the markets distribution of economic well-being
is not desirable, tax or welfare policies can change how the economic pie is divided.
CHAPTER 1
30
A C T I V E L E A R N I N G 2:
Discussion Questions
In each of the following situations, what is the governments role? Does the governments intervention improve the outcome?
a. Public schools for K-12 b. Workplace safety regulations c. Public highways d. Patent laws, which allow drug companies to charge high prices for life-saving drugs
31
CHAPTER 1
32
Principle #8: A countrys standard of living depends on its ability to produce goods & services.
CHAPTER 1
33
Principle #8: A countrys standard of living depends on its ability to produce goods & services.
34
Principle #9: Prices rise when the government prints too much money.
Inflation: increases in the general level of prices. In the long run, inflation is almost always caused
by excessive growth in the quantity of money, which causes the value of money to fall.
CHAPTER 1
35
Principle #10: Society faces a short-run tradeoff between inflation and unemployment
CHAPTER 1
36
37
38
6. Dont forget the real world. Read the Case Studies and In The News boxes in each chapter. They will help you see how the new terms, concepts, models, and graphs apply to the real world. As you read the newspaper or watch the evening news, see if you can find the connections with what youre learning in the textbook.
CHAPTER 1 TEN PRINCIPLES OF ECONOMICS
39
CONCLUSION
Economics offers many insights about the
behavior of people, markets, and economies.
CHAPTER 1
40
CHAPTER 1
41
CHAPTER 1
42
CHAPTER 1
43