This document outlines 10 key elements of economics according to Common Sense Economics by James Gwartney, Richard Stroup, and Dwight Lee. It discusses how incentives matter and affect behavior, the concept of scarcity and tradeoffs, how decisions are made at the margin, how trade promotes economic progress, how transaction costs are an obstacle to trade, how profits direct business activities, how people earn income by helping others, the sources of economic progress, the concept of the invisible hand in market prices, and how actions often have unintended long-term consequences.
How People Make Decisions
People Face Trade-offs
Rational People Think at the Margin
People Respond to Incentives
How People Interact
Trade Can Make Everyone Better off
Markets Are usually a Good Way to Organize Economic Activity
Government Can Sometimes Improve Market Outcomes
How the Economy as a Whole Works
A Country’s Standard of Living Depends on its Ability to Produce Goods and Services
Prices Rise When the Government Prints Too Much Money
Society Faces a Short-Run Trade-off between Inflation and Unemployment
Ten Principles of Economics - Micro & Macro EconomicsFaHaD .H. NooR
Ten Principles of Economics
Principle #1: People Face Trade-offs.
Principle #2: The Cost of Something Is What You Give Up to Get It.
Principle #3: Rational People Think at the Margin.
Principle #4: People Respond to Incentives.
Principle #5: Trade Can Make Everyone Better Off.
Principle #6: Markets Are Usually a Good Way to Organize Economic Activity.
Principle #7: Governments Can Sometimes Improve Market Outcomes.
Principle #8: The Standard of Living Depends on a Country’s Production.
Principle #9: Prices Rise When the Government Prints Too Much Money.
Principle #10: Society Faces a Short-run Trade-off Between Inflation and Unemployment.
How People Make Decisions
People Face Trade-offs
Rational People Think at the Margin
People Respond to Incentives
How People Interact
Trade Can Make Everyone Better off
Markets Are usually a Good Way to Organize Economic Activity
Government Can Sometimes Improve Market Outcomes
How the Economy as a Whole Works
A Country’s Standard of Living Depends on its Ability to Produce Goods and Services
Prices Rise When the Government Prints Too Much Money
Society Faces a Short-Run Trade-off between Inflation and Unemployment
Ten Principles of Economics - Micro & Macro EconomicsFaHaD .H. NooR
Ten Principles of Economics
Principle #1: People Face Trade-offs.
Principle #2: The Cost of Something Is What You Give Up to Get It.
Principle #3: Rational People Think at the Margin.
Principle #4: People Respond to Incentives.
Principle #5: Trade Can Make Everyone Better Off.
Principle #6: Markets Are Usually a Good Way to Organize Economic Activity.
Principle #7: Governments Can Sometimes Improve Market Outcomes.
Principle #8: The Standard of Living Depends on a Country’s Production.
Principle #9: Prices Rise When the Government Prints Too Much Money.
Principle #10: Society Faces a Short-run Trade-off Between Inflation and Unemployment.
Gregory Mankiw in his Principles of Economics outlines Ten Principles of Economics that will replicate here, they are:
*People face trade-offs
*The cost of something is what you give up to get it
*Rational people think at the margin
*People respond to incentives
*Trade can make everyone better off
*Markets are usually a good way to organize economic activity
*Governments can sometimes improve market outcomes
*A country's standard of living depends on its ability to produce goods and services
*Prices rise when the government prints too much money
*Society faces a short-run tradeoff between Inflation and unemployment.
Gregory Mankiw in his Principles of Economics outlines Ten Principles of Economics that will replicate here, they are:
*People face trade-offs
*The cost of something is what you give up to get it
*Rational people think at the margin
*People respond to incentives
*Trade can make everyone better off
*Markets are usually a good way to organize economic activity
*Governments can sometimes improve market outcomes
*A country's standard of living depends on its ability to produce goods and services
*Prices rise when the government prints too much money
*Society faces a short-run tradeoff between Inflation and unemployment.
It is a presentation of about Economics and its principles.This ppt will teach you economics from basic level to advanced level. Studying economics helps us to compare our country economy to different countries in the world.
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1. Common Sense Economics
What Everyone Should Know About Wealth & Prosperity
by James Gwartney, Richard Stroup, and Dwight Lee
10 Key Elements
of Economics
CommonSenseEconomics.com
2. Ten Key Elements of
Economics
Provide an introductory flavor for the course
Bridge between common sense & basic
principles of economics
Begin to help you “think like an economist”
Provide some explanation as to why our
economy and our world work the way they do
4. What are Incentives?
Incentives are the costs and benefits of
making specific decisions.
Changing incentives alters people’s
behavior.
Incentives operate on all levels-
personal, familial, industry and societal
level.
5. Gasoline Prices…
When the price of gas
rises, do you change
your behavior?
Do you really?
What’s the difference
between short-run
changes and long-run
changes in behavior?
6. Volunteerism…
Incentives don’t
matter only to the
greedy and selfish.
What incentives do
volunteers have, if
not monetary?
Why do you
volunteer?
7. Seat belts save lives…
Does wearing a seat
belt create any
incentives?
Why do people get in
more accidents now
that cars are safer?
9. The condition of scarcity
Our resources are limited…but our desire
for goods & services is NOT.
When production costs are high, it is
because the resource in question is
desired for other purpose(s) as well.
A resource is scarce if it has more than
one valuable use.
10. To Choose is to Refuse
Because we are constantly
faced with scarcity, we must
make choices.
Every time we choose one
thing (material or not) we
refuse something else.
We constantly make trade-
offs in our decisions.
11. But, but, but…
What if someone else
buys your lunch?
Merely a shifting of
cost, not an elimination
And is it really free?
13. Marginalism…
Few, if any, decisions are “all-or-nothing”.
Marginal means additional…
Marginalism is seldom ignored in our
personal decisions, but frequently in our
conversations and in politics.
To get the most out of our resources, we
should only take an action when the
marginal benefits are greater than the
marginal costs.
14. Marginal Decision Examples…
How clean is your house?
Do you clean to 100%
cleanliness?
How about when company
is coming?
How about when selling
your house?
You clean to the point
where the marginal costs
outweigh the expected
marginal benefits!
16. People gain when they trade…
Trade moves goods from people who
value them less to people who value
them more.
Trade makes larger outputs/consumption
possible as we specialize.
Voluntary exchange allows production
costs to fall through mass production.
17. Trade exists at many levels…
Enrolling in this class
Shopping at Safeway
Having a garage sale
Taking a vacation
Buying imports from
China & Mexico
19. Transaction Costs
Spending resources on:
Searching out trading partners
Searching out product information
Negotiating terms of trade
Closing sales
20. Why do we experience
transaction costs?
Physical objects
Can’t get there from here!
Lack of information
Finding sellers/ best deals
Political obstacles
Taxes, tariffs, licensing
requirements, regulations, etc
.
Role of middlemen?
Increase or decrease TC?
22. Why profits are not the enemy…
People of a nation are better off if their
resources produce valuable goods &
services.
Less productive use of resources should
thus be discouraged.
This is the function of profits and losses.
Profit is a reward for transforming
resources into something of greater
value.
23. Losses just as important!
A T-shirt factory has total
production costs of $20,000.
1,000 T-shirts sold at $22 each =
$2,000 in profit.
Wealth has been created for the
producer and consumer.
What if shirts can only be sold for
$17 each?
T-shirts are worth less to
consumers than the resources
required to produce them.
What’s the trade-off if firms continue
to operate at a loss?
25. Earning Income
People are different in many ways…This
is our greatest asset!
Differences in income arise because they
affect the value of goods and services
individuals are willing to provide.
There is a direct link (ceteris paribus)
between helping others & income.
If you want a large income- figure out
how to help others!!!
26. Income Variation
College students are
rewarded for
studying
Star athletes and
entertainers are
rewarded for their
special skills
Entrepreneurs are
rewarded for their
innovations.
27. 8. Economic progress
comes primarily
through
trade, investment, be
tter ways of doing
things, and sound
economic
institutions.
28. What is Economic Progress?
Americans produce and earn THIRTY TIMES
as much as they did in 1750.
Why are Americans so much more productive
today than they were 250 years ago?
Why is economic progress important?
29. Sources of Economic Growth
Investments in productive assets
Tools, machines, “human capital”
Improvements in technology
Internal combustion
engine, electricity, computers, by-pass
surgeries, etc.
Improvements in economic organization
Legal system, competitive markets, etc.
30. 9. The “invisible hand”
of market prices
directs buyers and
sellers toward
activities that
promote the general
welfare.
31. Invisible What?
Adam Smith, The Wealth of
Nations (1776)
“It is his own advantage, indeed, and
not that of society which he has in
his view. But the study of his own
advantage naturally, or rather
necessarily, leads him to prefer that
employment which is most
advantageous to society…He
intends only his own gain, and he is
in this, as in many other cases, led
by an invisible hand to promote an
end which was not part of his
intention.”
32. Friedrich von Hayek
Primary function of markets is to provide
information (both to buyers and sellers)
Consider the price of apples…
Price indicative of what consumers are willing and
able to pay, but also incorporates costs of
production/bringing to market
Things constantly happen to make both consumer
value & production costs vary…
33. 10. Too often long-term
consequences, or
the secondary
effects, of an action
are ignored.
34. Unintended Consequences
Perhaps the most common source of
economic error.
Actions often promote secondary effects.
Tariffs & quotas to protect domestic
industries
Paying for pencils in the 2nd grade class