LU 1:Introduction of economics (10 principles of economics (trade off-get…
LU 1:Introduction of economics
10 principles of economics
trade off-get one thing, give up another thing
opportunity cost-what you give up to get another things
marginal-make decision by comparing MB and MC
incentives-MB exceeds MC
market-Adam Smith -invisible hand
government/ interventions-property rights-market failure caused by externality,market power
standard of living-GDP-product,income,expenditure
inflation-print too much money
Phillips curve-trade off between infaltion and unemployment-short run trade off,business role-business cycle
1) circular flow diagram
visual model-how dollars flow through markets
2) production possibilities frontier
graph-combination of output that the economy can possibly produce given the available factors of production,production technology.
efficiency, trade offs, opportunity cost, economic growth.
postitive VS normative analysis
1) positive statement
-attempt to describe the world, called descriptive analysis
-how the world should be,called prescriptive analysis
2 ways to measure differences in costs of production
1)the number of hours required to produce a unit of output
2)the opportunity cost of sacrificing one good for another
-comparison among producers of a good according to their productivity.
what must be given up to obtain some item.
the producer who has the smaller opportunity cost of producing a good
benefits of trade
allows people to specialize in activities in which they have a comparative advantages.