10 principles of eco i

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  • 1. TEN PRINCIPLES OF ECONOMICS Chapter 1 ECON202, Maclachlan
  • 2. ECONOMY
    • From the Greek for one who manages a household.
    • Key concept: scarcity.
    ECON202, Maclachlan
  • 3. Definition
    • Economics: the study of how society manages its scarce resources.
    • Mankiw summarizes all of economics with 10 principles …
    ECON202, Maclachlan
  • 4. 1. People face trade-offs. ECON202, Maclachlan
  • 5. 2. The cost of something is what you give up to get it. ECON202, Maclachlan
  • 6. 3. Rational people think at the margin. ECON202, Maclachlan
  • 7. 4. People respond to incentives. ECON202, Maclachlan
  • 8. 5. Trade can make everyone better off. ECON202, Maclachlan
  • 9. 6. Markets are usually a good way to organize economic activity. ECON202, Maclachlan
  • 10. Governments can sometimes improve market outcomes. ECON202, Maclachlan
  • 11. 8. A country’s standard of living depends on its ability to produce goods and services. ECON202, Maclachlan
  • 12. 9. Prices rise when the government prints too much money. ECON202, Maclachlan
  • 13. 10. Society faces a short-run tradeoff between inflation and unemployment. ECON202, Maclachlan
  • 14. Economists as Advisors
    • Harry Truman said he wanted a one-armed economist.
    ECON202, Maclachlan
  • 15. Ten Things Economists Agree On
    • A ceiling on rents reduces the quantity and quality of housing available. (93%)
    • Tariffs and import quotas usually reduce general economic welfare. (93%)
    • Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
    • Fiscal policy has a significant stimulative impact on a less than fully employed economy. (90%)
    ECON202, Maclachlan
  • 16.
    • 5. If the federal budget deficit is to be balanced, it should be done over the business cycle rather than yearly. (85%)
    • 6. Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
    • 7. A large federal budget deficit has an adverse effect on the economy. (83%)
    • 8. A minimum wage increases unemployment among young and unskilled workers. (79%)
    ECON202, Maclachlan
  • 17.
    • 9. The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
    • 10. Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)
    ECON202, Maclachlan
  • 18. Thinking Like an Economist Chapter 2 ECON202, Maclachlan
  • 19. Scientific Methodology
    • “ The whole of science is nothing more than the refinement of everday thinking.”
    • --Albert Einstein
    ECON202, Maclachlan
  • 20.
    • Observation
    • Theory
    • More Observation
    ECON202, Maclachlan
  • 21. Role of Assumptions
    • A physicist, a chemist and an economist are stranded on an island, with nothing to eat. A can of soup washes ashore.
    • The physicist says, "Lets smash the can open with a rock."
    • The chemist says, "Lets build a fire and heat the can first."
    • The economist says, "Lets assume that we have a can-opener...“
    • --Paul Samuelson
    ECON202, Maclachlan
  • 22. The Production Possibilities Frontier ECON202, Maclachlan
  • 23. A Shift in the Production Possibilities Frontier ECON202, Maclachlan
  • 24. The Circular Flow ECON202, Maclachlan
  • 25. Microeconomics vs. Macroeconomnics
    • Micro: the study of how households and firms make decisions and how they interact in markets.
    • Macro: the study of economy-wide phenomena, including inflation, unemployment and growth
    ECON202, Maclachlan
  • 26. Positive vs. Normative Statements
    • Positive statements: claims that attempt to describe the world as it is.
    • Normative statements: claims that attempt to prescribe how the world should be.
    ECON202, Maclachlan
  • 27. Figure A-1 Types of Graphs ECON202, Maclachlan
  • 28. Figure A-2 Using the Coordinate System ECON202, Maclachlan
  • 29. Table A-1 Novels Purchased by Emma Copyright©2003 Southwestern/Thomson Learning
  • 30. Figure A-3 Demand Curve ECON202, Maclachlan
  • 31. Figure A-4 Shifting Demand Curves ECON202, Maclachlan
  • 32. Figure A-5 Calculating the Slope of a Line ECON202, Maclachlan
  • 33. Figure A-6 Graph with an Omitted Variable ECON202, Maclachlan
  • 34. Figure A-7 Graph Suggesting Reverse Causality ECON202, Maclachlan