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CHAPTER 1 INTRODUCTION MICROECONOMIC (10 PRINCIPLE OF ECONOMIC (HOW PEOPLE…
CHAPTER 1 INTRODUCTION MICROECONOMIC
10 PRINCIPLE OF ECONOMIC
HOW PEOPLE INTERACT
Trade can make everyone better off
Markets are usually a good way to organize economic activity
Government can sometimes improve economic outcomes
HOW PEOPLE MALE DECISON
People face trade-offs
The cost of something is what you give up to get it
Rational peolle think at the margin
People respond to incentive
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
ECONOMIC MODELS
THE CIRCULAR FLOW
Firms
Households
Markets for goods and services
Markets for factor of production
Factor of production
THE PRODUCTION POSSIBILITIES FRONTIER (PPR)
Concept illustrated by PPR
Efficency
Trade-offs
Opportunities cost
Economic growth
HOW TO EXPANDS THE SET OF CONSUMPTION OPPORTUNITIES
COMPARATIVE ADVANTAGE
ABSOLUTE ADVANTAGE
TRADE-OFF
OPPORTUNITIES COST