Name: Jim Kyle D.

Aying Date: 01/30/2024

Course : ECON 122 – 10418 Schedule: 7:30AM – 8:30 AM (MWF)

In the simplest terms, economics studies the organization of money supply, business, and industry.
Some fundamental ideas are outlined below:

Ten Principles of Economics are outlined by Gregory Mankiw in his Principles of Economics, and
these are the ones we shall follow here:

How People Make Decisions

1. People face trade-offs.

 Trade-off is the process of sacrificing one feature or quantity in exchange for another
element or quantity.
2. The cost of something is what you give up getting it.
 People have to weigh trade-offs while making decisions, thus it's important to weigh the
advantages and disadvantages of different options.
3. Rational people think at the marginal cost and marginal revenue.
 A company looks at the extra production that the new labor will bring to the overall
output when deciding whether to hire more workers economically. Hiring only occurs
when the laborer's marginal product is greater than or equal to the laborer's marginal
cost. The same holds true if a customer chooses to purchase an extra unit of a good.
4. People respond to incentives.
 An incentive is anything that persuades someone to take action [by rewarding or
punishing those who alter their behavior]. Rational individuals react to incentives
because they weigh costs and benefits while making decisions. Positive or bad
intentions might be included in incentives.

How People Interact With Each Other

5. Trade can make everyone better off.

 Think about transactions that happen within your house. It is likely that your family
trades goods and services with other families on a daily basis. The majority of
households don't construct their own homes, sew their own clothing, or tend their own
gardens. Trade makes it possible to specialize in goods that give households or nations a
competitive advantage.
6. Markets are usually a good way to organize economic activity.
 Numerous nations that once had centrally planned economies have moved away from
this framework and are attempting to establish market economies. A market economy is
one in which the distribution of resources is determined by the decentralized choices
made by several businesses and people participating in exchanges for products and
services.
 7. Governments can sometimes improve market outcomes.
 The government can intervene in the economy for two main reasons: to promote
equality and efficiency.
 When there is market failure—a circumstance in which a market operating
independently is unable to allocate resources effectively—government regulation can
be most helpful.

How The Entire Economy Works

8. A country's standard of living depends on its ability to produce goods and services.
 The explanation for differences in living standards lies in differences in productivity.
9. Growth of money leads to inflation
 A persistent rise in the average level of prices across the economy is known as inflation.
The value of money decreases when the government prints a lot of it.
10. Society faces a short-run tradeoff between Inflation and unemployment.
 The majority of economists think that increasing or injecting money into the economy
will have the short-term impact of lowering unemployment and raising prices.