CHAPTER 1: 10 principles of economics

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CHAPTER 1: 10 principles of economics by Mind Map: CHAPTER 1: 10 principles of economics

1. 1-1 HOW PEOPLE MAKE DECISIONS

1.1. 1_1a. PRINCIPLE 1: People face trade-off

1.1.1. All deciisions involve tradeoff

1.1.1.1. efficiency

1.1.1.2. equality

1.2. 1_1b. PRINCIPLE 2: The cost of something is what you give up to get it

1.2.1. Making decisions requires comparing the cost and benefit of ALTERNATIVE CHOICES

1.2.2. OPPORTUNITY COST: whaterver must be given up to obtain it

1.2.3. It is the relevant cost for decision making

1.3. 1_1c. PRINCIPLE 3: Rational people think at the Margin

1.3.1. RATION PEOPLE

1.3.1.1. Systematically and purposefully do the best they can to achieve their objectives

1.3.1.2. making decisions by evaluting costs and benefits of MARGINAL CHANGES

1.4. 1_1d. PRINCIPLE 4: People respond to incentives

1.4.1. ICENTIVE

1.4.1.1. something that induces a person to act, the prospect of a reward or punishment

1.4.2. Rational people respond to incentives

1.4.3. Countries also benefit from trade & specialization

1.4.3.1. get better price abroach for goods the produce

1.4.3.2. buy other goods more cheaply from abroad than could be produced at home

2. 1-2 HOW PEOPLE INTERACT

2.1. 1_2a. PRINCIPLE 5: Trade can make everyone better off

2.1.1. Rather than being self-sufficient, people can specialize in producing one good or sevice and exchange it for other goods

2.2. 1_2b. PRINCIPLE 6: Markets are usually a good way to organize economic activity

2.2.1. MARKET

2.2.1.1. a group of buyers and sellers

2.2.2. ORGANIZE ECONOMICS ACTIVITIES

2.2.2.1. WHAT good to produce

2.2.2.2. HOW to produce them

2.2.2.3. WHO gets them

2.2.2.4. HOW MUCH of each to produce

2.2.3. MARKETING ECONOMY

2.2.3.1. allocates resources through the decentralized decisons of many househol and firms as they interact in markets

2.2.4. ADAM SMITH , The Wealth of Nations (1776)

2.2.4.1. Each of these households and firms acts as if "led by an invisible hand" to promote generel economic well-being

2.2.5. THE INVISIBLE HAND

2.2.5.1. works through the price system

2.2.5.1.1. The interaction of buyers and seller determines prices

2.2.5.1.2. Each price reflects the good's value to B and the cost of producing the good

2.2.5.1.3. Prices guide self-interested gia đình và doanh nghiệp đưa ra quyết định, trong nhiều TH, maxmize của kinh tế xã hội well-being

2.3. 1_2c. PRINCIPLE 7: Goverments can sometimes improve market outcomes

2.3.1. Important role for Tổng thống

2.3.1.1. ENFORCE PROPERTY RIGHTS with police, courts, laws

2.3.2. MARKET FAILURE

2.3.2.1. when the market fails to allocate nguồn nhân lực xh efficiently

2.3.3. CAUSES

2.3.3.1. EXTERNALITIES

2.3.3.1.1. when the production or consumption of a good affects bystanders vd_ ô nhiễm mt

2.3.3.2. MARKET POWER

2.3.3.2.1. 1 NG B and S has substantial ảnh hưởng về market price vd_monopoly độc quyền

2.3.4. PROMOTE EFFICIENCY

2.3.5. market outcome to PROMOTE EQUITY

2.3.6. NOT desirable, tax or welfare policies can change how the eco "pie" is divided

3. 1-3 HOW THE ECONOMY AS WHOLE WORKS

3.1. 1_3a.PRINCIPLE 8: A country's Standard of living depends on its ability to produce goods and services

3.1.1. HUGE VARIATION

3.1.1.1. INCOME RICH ĐẤT NƯỚC > 10 TIMES INCOME POOR ĐẤT NƯỚC

3.1.1.2. TIÊU CHUẨN US gấp 8 lần so vs 100 năm trc

3.1.2. PRODUCTIVITY

3.1.2.1. Depend on the equipment, skills, công nghệ to workers

3.1.3. other factors ít ảnh hưởng

3.2. 1_3b. PRINCIPLE 9: Price rise when the goverment prints too much money

3.2.1. INFLATION

3.2.1.1. Increases in the general level of prices

3.2.1.2. in long run, caused by excessive growth in the quantity of money, giá trị tiền giảm

3.2.1.3. in nhiều tiền thì lạm phát càng tăng

3.3. 1_3c. PRINCIPLE 10: Society faces a short-run trade-off between inflation and unemployment

3.3.1. in short run

3.3.1.1. economic policies push lạm phát và thất nghiệp

3.3.2. tradeoff is always present

4. WHAT ECONOMICS IS ALL ABOUT

4.1. ECONOMICS :The study of how society manages its scare resources

4.2. SCARCITY: The limited nature of society's resoures