LU 1
Introduction to Economics ‼

Ten Principles of Economics ✏

The Word Economy comes from a Geek word for "one who manages a household"

Economics is the study of how society manages its scarce resources

Scarcity means that society has limited resources and therefore cannot produce all the goods and

Economics Models 🖊

  1. Circular Flow Diagram
  1. Production Possibilities Frontier

Interdependence and the Gains from Trade

Comparative advantage

A Parable For The Modern Economy

How People Make decisions

  1. People Face Trade-offs

Efficiency versus Equity

  1. The Cost of Somethings is What You Give Up to Get It
  1. Rational People Think at the Margin

Opportunity Cost

  1. People Respond to Incentives

How People Interact

  1. Trade Can Make Everyone Better Off
  1. Markets are usually a Good Way to Organize Economic Activity
  1. Government Can Sometimes Improve Market Outcomes.

How The Economy As A Whole Works

  1. A Country's Standard of Living Depends on Its Ability to Produce Goods and Services.

Productivity

  1. Prices Rise When the Government Prints Too Much Money

Inflation

  1. Society Faces a Short-run Trade-off between Inflation and Unemployment

✅Inflation or Unemployment
✅ Trade off

The economist as policy adviser

Positive versus Normative Analysis

Absolute Advantage

Opportunity cost and comparative advantage

Specialization and Trade

Comparative advantage and trade

Production possibilities