10 PRINCIPLES

OF ECONOMICS
-A GOOD DAY TO START OFF WITH
SHIN CHAN-

IMAGINE YOU ARE

SHIN CHAN

Shin Chan has only RM60.00,

he can only choose either one.

OR
Pizza

Burger

RM 60.00 RM 60.00
inclusive gst

inclusive gst

M
R

.
0
6

0
0

PRINCIPLE # 1 :
PEOPLE FACE TRADE
OFFS.

To get one thing we usually give up

another thing.

ft
e
l
!
I
G
IN
H
T
H
O
G
N
R
A
!
!!

RM 60.00

PIZZA

PRINCIPLE # 2 : The
cost of something is
what you give up to
get it.
- The opportunity cost of
6
something is what you give RM
up to obtain that item.

0
0
.
0

PIZZA OR
B U R G ER
??
WHICH T
O CHOOS
E?
H O W TO
C H OOS E
???

OR
Pizza

Burger

PRINCIPLE # 3 :
Rational people think
at the margin.
-

Marginal changes are small,

incremental adjustments to an
existing plan of action.
- People make decisions by
comparing costs and benefits at

Not only that.

PRINCIPLE # 4 :
People respond to
incentives.
Marginal changes in costs or
benefits motivate people to
respond.
- Decision to choose : Marginal
benefit > Marginal cost.

Pizza

TRADE

-Specialize in pizza

Burger

-Specialize in burger

Specialization in the activities

Variety of goods and services
Competition
Cheaper price

PRINCIPLE # 5 :
Trade can make
everyone better off.

People gain their ability to trade

with one another.
- Compeitition results in gains from
trading.
- Allow people to specialize in what
they do best.
-

IN A MARKET
WHAT TO
BUY??????

Pizza

Burger

PRINCIPLE # 6 :
Markets are usually a
good way to organize
Economic
Activity.
- Allocates resources through
decentralized decisions of many
firms and housholds as they
interact in markets for goods and
services.

How does markets work??

It is through the
PROPERTY RIGHTS
that are enforced.

PRINCIPLE # 7 :
Governments can
sometimes improve
market
outcomes.
Property right are the ability of an
individual to own and exercise
control over a scarce resource.

We live a luxury
life.

PRINCIPLE # 8 : A
countrys standard of living
depends on its ability to
produce goods and
services.
- Personal incomes
-Total market value of a nations
production.

But
when.
RM 600.00
RM 60.00

PRINCIPLE # 9 :
Prices rise when
government prints
too much money.
-

Quantity of money
money

Value of

Quantity of money
Overall level of spending
igh demands on goods & service
Unemployment rate

PRINCIPLE # 10 : Society
faces a short-run trade-off
between inflation &
unemployement.
-

Phillips curve

Trade-of
Cost

Market
Government
Standard living
Margin
Prices
Incentives
Trade Short run trade-of