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Lecture 1 Ten Principles of Economics
Lecture 1 Ten Principles of Economics
Lecture 1
Objectives
to understand what is economics about
to see how people make decisions
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Scarcity - society has limited resources and therefore cannot produce all the
goods and services people wish to have
Economics is the study of how society manages its scarce resources
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How
the
economy
as
whole
works
much money
economic activity
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costs.
hyperinflation
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Society
Faces
Short-Run
Trade-off
between
Inflation
and
Unemployment
Unemployment
Increasing the amount of money increase demand and increase the inflation
companies hire new workers decrease unemployment
Usually politicians are interested in reducing unemployment
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Conclusions
people face trade-offs among alternative goals
the cost of any action is measured in terms of forgone opportunities
rational people make decisions by comparing marginal costs and marginal benefits
people change their behavior in response to the incentives they face
trade and interdependence can be mutually beneficial
markets are usually a good way of coordinating economic activity
the government can potentially improve market outcomes by remedying a market failure or by
promoting greater economic equality
productivity is the ultimate source of living standards
growth in the quantity of money is the ultimate source of inflation
society faces a short-run trade-off between inflation and unemployment
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Vocabulary
scarcity = raritate
externality = externalitate
efficiency = eficien
productivity = productivitate
equality = egalitate
inflation = inflaie
hyperinflation = hiperinflaie
incentive = stimulent
household = gospodrie
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Bibliography
Mankiw N.G. Principles of Economics (Sixth Edition), South-Western
Cengage Learning, 2012, p. 3 - 20
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