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Microeconomics Learning Unit 1 (TEN PRINCIPLES OF ECONOMICS (people face…
Microeconomics Learning Unit 1
TEN PRINCIPLES OF ECONOMICS
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
Trad can make everyone better off
Markets are usually a good way to organize economic activities
Governments can sometimes improve the economic outcomes
A country's Standard of living depends on its abilities 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
Simplify reality to improve understanding
The Circular Flow Diagram
To show how the money flow through market
Firm & Household
Factors of Production:
Land
Labor
*Capital
Production Possibilities Frontier PPF
Combinations of output that the country can possibly produce with the available factors of production and technology
Concepts illustrated:
Efficiency
Trade-Offs
Opportunity Cost
Economic growth
Positive VS Normative
Positive
describe the world as it is
descriptive analysis
Normative
describe how the world should be
prescriptive analysis
PRODUCTIVE POSSIBILITIES
Specialization & Trade
trade benefit everyone in a society
Comparative advantage
Differences in the cost of production
number of hours required
opportunity cost
Absolute Advantage
comparison among producers of a good according to their productivity
require a smaller quantity of inputs