cap 1_10 principles.pptx

7/25/2019 cap 1_10 principles.pptx

1/39

WHY SHOULD WE STUDYECONOMICS?

Chapter 1


2/39

WHAT ECONOMICS IS ALL ABOUT?

Economics: the study of how society manages itsscarce resources, e.g.

Scarcity: the liite! "at#re $% &$'iet()& re&$#r'e&

What kinds of questions does Economicsaddress?

h$* pe$ple !e'i!e *hat t$ +#(,h$* #'h t$ *$r, &a-e, a"! &pe"!

h$* r& !e'i!e h$* #'h t$ pr$!#'e,h$* a"( *$rer& t$ hire

h$* &$'iet( !e'i!e& h$* t$ !i-i!e it& re&$#r'e& +et*ee""ati$"al !e%e"&e, '$"er g$$!&, pr$te'ti"g thee"-ir$"e"t, a"! $ther "ee!&


3/39

ECONOMICS IN S/O0T:AT $17.5 MILLION A YEAR, LEBRON JAMES IS UNDERPAID?


4/39

ECONOMICS IN D0U:WHY DOESNT THE GOVERNMENT LEGALIZE WEED?


5/39

ECONOMICS IN A0T:HOW MUH IS ART WORTH?

i""i"g -i$li"i&t, 3$&h#a Da-i! Bell ha& a" e&tiate! "et *$rth $% 415 illi$"


6/39

3OSHUA BELL AT A D.C. MET0O STATION

1 HOU0 /LAYIN WITH HIS 46.5 MILLION 7IOLIN: EA0NIN 468


7/39

ENE0Y 9 EN7I0ONMENTWHY DOESN)T THE O7E0NMENT BAN HYD0AULIC 0ACTU0IN

;0AC


8/39

ECONOMICS IN OOD:

WHY DONT ALL !ARMERS GROW AND SELL ORGANI VEGGIE AND MEAT GIVEN THE !AT THAT THEIR PRIES ARE SO HIGH?


9/39

IS THE WO0LD A BETTE0 /LACE TODAYTHAN IT WAS BEO0E?


10/39

DEATON IS HONO0ED O0 HIS MEASU0EMENT O BASIC ECONOMICINDICATO0S USIN HIS AIDS ;ALMOST IDEAL DEMAND SYSTEM= MODEL,

AND HIS WO0< IN /O7E0TY AND INE>UALITY AMON NATIONS.

LIE IS BETTE0 NOW THAN AT ALMOST ANY TIME IN HISTO0Y @ MO0E


11/39

LIE IS BETTE0 NOW THAN AT ALMOST ANY TIME IN HISTO0Y,@... MO0E/EO/LE A0E 0ICHE0 AND EWE0 /EO/LE LI7E IN DI0E /O7E0TY. LI7ESA0E LONE0 AND /A0ENTS NO LONE0 0OUTINELY WATCH A >UA0TE0

O THEI0 CHILD0EN DIE.@


12/39

ADAM SMITH, ATHE0 O MODE0N ECONOMICS


13/39

It i& "$t %r$ the +e"e-$le"'e $% the +#t'her, the+re*er, $r the +aer, that *e epe't $#r !i""er, +#t%r$ their regar! t$ their $*" i"tere&t. We a!!re&&

$#r&el-e&, "$t t$ their h#a"it( +#t t$ their &el%2l$-e,a"! "e-er tal t$ the $% $#r $*" "e'e&&itie& +#t $%their a!-a"tage&.@


14/39

WHAT ARE THE PRINCIPLES OF HOW

PEOPLE MAKE DECISIONS?


15/39

/0INCI/LE 1:

/EO/LE ACE T0ADEOS

All dcisions in!ol! trado"s#

Eaple&:

/r$te'ti"g the e"-ir$"e"t re#ire& re&$#r'e&

that '$#l! $ther*i&e +e #&e! t$ pr$!#'e'$"er g$$!&.


16/39

/0INCI/LE 1:

/EO/LE ACE T0ADEOS

S$'iet( %a'e& a" ip$rta"t tra!e$:eciency vs. equality

E$cincy: *he" &$'iet( get& the $&t %r$ it&

&'ar'e re&$#r'e& E%&ality: *he" pr$&perit( i& !i&tri+#te! #"i%$rl(a$"g &$'iet()& e+er&

Tradeo: To achieve greater equality,could redistribute income from wealthy to poor.But this reduces incentive to work and produce,shrinks the size of the economic pie.!


17/39

/0INCI/LE 8:

THE COST O SOMETHIN ISWHAT YOU I7E U/ TO ET IT

Mai"g !e'i&i$"& re#ire& '$pari"g the '$&t&a"! +e"et& $% alter"ati-e 'h$i'e&.

The o''ort&nity cost$% a"( ite i&

*hate-er #&t +e gi-e" #p t$ $+tai" it. It i& the rele-a"t '$&t %$r !e'i&i$" ai"g.

Let)& !$ a" eperie"t a+$#t $pp$rt#"it( '$&t


18/39

/0INCI/LE 8:

THE COST O SOMETHIN ISWHAT YOU I7E U/ TO ET IT

"#amples:

The '$&t $%

Fg$i"g t$ '$llege %$r a (ear i& "$t G#&t the t#iti$", +$$&, a"!%ee&, +#t al&$ the %$reg$"e *age&.

F&eei"g a $-ie i& "$t G#&t the pri'e $% the ti'et,+#t the -al#e $% the tie ($# &pe"! i" the theater.


19/39

/0INCI/LE 6:0ATIONAL /EO/LE THIN< AT THE MA0IN

Rational 'o'l

&(&teati'all( a"! p#rp$&e%#ll( !$ the +e&t the( 'a" t$

a'hie-e their $+Ge'ti-e&.

ae !e'i&i$"& +( e-al#ati"g '$&t& a"! +e"et& $%mar(inal c)an(s, i"'ree"tal a!G#&te"t& t$ a"ei&ti"g pla".


20/39

/0INCI/LE 6:0ATIONAL /EO/LE THIN< AT THE MA0IN

Eaple&:

Whe" a &t#!e"t '$"&i!er& *hether t$ g$ t$ '$llege%$r a" a!!iti$"al (ear, he '$pare& the %ee& 9

%$reg$"e *age&t$ the etra i"'$ehe '$#l! ear" *ith the etra (ear $% e!#'ati$".

Whe" a a"ager '$"&i!er& *hether t$ i"'rea&e

$#tp#t, &he '$pare& the cost of the needed labora"! aterial& t$ the e#tra revenue.

Bata" 2 The Dar


21/39

/0INCI/LE :

/EO/LE 0ES/OND TO INCENTI7ES

Incnti!:&$ethi"g that i"!#'e& a per&$" t$a't, i.e.the pr$&pe't $% a re*ar! $r p#"i&he"t.

$ational people respond to incentives.

Eaple&: Whe" ga& pri'e& ri&e, '$"er& +#( $re h(+ri! 'ar&

a"! %e*er ga& g#li"g SU7&.

Whe" 'igarette tae& i"'rea&e,

tee" &$i"g %all&.


22/39

A C T I 7 E L E A 0 N I N

A//LYIN THE /0INCI/LES

Y$# are &elli"g ($#r 1JJK M#&ta"g. Y$# ha-ealrea!( &pe"t 41 $" repair&.

At the la&t i"#te, the tra"&i&&i$" !ie&. Y$# 'a"

pa( 4K t$ ha-e it repaire!, $r &ell the 'ar a&i&.@

I" ea'h $% the %$ll$*i"g &'e"ari$&, &h$#l! ($#ha-e the tra"&i&&i$" repaire!? Eplai".

A# Bl#e +$$ -al#e ;*hat ($# '$#l! get %$r the'ar= i& 4K5 i% tra"&i&&i$" *$r&, 45 i% it

!$e&")t

*# Bl#e +$$ -al#e i& 4K i% tra"&i&&i$" *$r&,

455 i% it !$e&")t 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use asper"itted in a license distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.


23/39


ANSWE0S

C$&t $% i"g tra"&i&&i$" 4K

A# Bl#e +$$ -al#e i& 4K5 i% tra"&i&&i$" *$r&,45 i% it !$e&")t

Be"et $% i"g the tra"&i&&i$" 4;4K5 P 5=.

It)& *$rth*hile t$ ha-e the tra"&i&&i$" e!.

*# Bl#e +$$ -al#e i& 4K i% tra"&i&&i$" *$r&,

455 i% it !$e&")tBe"et $% i"g the tra"&i&&i$" i& $"l( 45.

/a(i"g 4K t$ tra"&i&&i$" i& "$t *$rth*hile.

2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as

per"itted in a license distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
https://www.youtube.com/watch?v=Yqvbv-SB4bghttps://www.youtube.com/watch?v=Yqvbv-SB4bg


24/39

WHAT ARE THE PRINCIPLES OF

HOW PEOPLE INTERACT


25/39

/0INCI/LE 5:T0ADE CAN MA


26/39

/0INCI/LE K:MA0


27/39

/0INCI/LE K:MA0


28/39

/0INCI/LE :

O7E0NMENTS CAN SOMETIMESIM/0O7E MA0


29/39

/0INCI/LE :



30/39

/0INCI/LE :



31/39


DISCUSSION >UESTION

I" ea'h $% the %$ll$*i"g &it#ati$"&, *hat i& theg$-er"e"t)& r$le? D$e& the g$-er"e"t)&i"ter-e"ti$" ipr$-e the $#t'$e?

a# /#+li' &'h$$l& %$r


32/39

WHAT ARE THE

PRINCIPLES OFHOW THE ECONOMY

AS A WHOLE WORKS


33/39

/0INCI/LE :A COUNT0Y)S STANDA0D O LI7IN DE/ENDS ON ITS

ABILITY TO /0ODUCE OODS 9 SE07ICES

H#ge -ariati$" i" li-i"g &ta"!ar!& a'r$&& '$#"trie&a"! $-er tie:

A-erage i"'$e i" ri'h '$#"trie& i& $re tha" te" tie&

a-erage i"'$e i" p$$r '$#"trie&. The U.S. &ta"!ar! $% li-i"g t$!a( i& a+$#t

eight tie& larger tha" 1 (ear& ag$.


34/39

/0INCI/LE :A COUNT0Y)S STANDA0D O LI7IN DE/ENDS ON ITS

ABILITY TO /0ODUCE OODS 9 SE07ICES

The $&t ip$rta"t !eteri"a"t $% li-i"g&ta"!ar!&: 'rod&cti!ity, the a$#"t $% g$$!&a"! &er-i'e& pr$!#'e! per #"it $% la+$r.

/r$!#'ti-it( !epe"!& $" the e#ipe"t, &ill&, a"!te'h"$l$g( a-aila+le t$ *$rer&.

Other %a't$r& ;e.g., la+$r #"i$"&, '$petiti$" %r$a+r$a!= ha-e %ar le&& ipa't $" li-i"g &ta"!ar!&.


35/39

/0INCI/LE J:

/0ICES 0ISE WHEN THE O7E0NMENT/0INTS TOO MUCH MONEY

In1ation: i"'rea&e& i" the ge"eral le-el $% pri'e&.

I" the l$"g r#", i"ati$" i& al$&t al*a(& 'a#&e!+( e'e&&i-e gr$*th i" the #a"tit( $% $"e(,

*hi'h 'a#&e& the -al#e $% $"e( t$ %all.The %a&ter the g$-t 'reate& $"e(,

the greater the i"ati$" rate.


36/39

/0INCI/LE 1:SOCIETY ACES A SHO0T20UN T0ADEO BETWEEN

INLATION AND UNEM/LOYMENT

I" the &h$rt2r#" ;1P8 (ear&=,a"( e'$"$i' p$li'ie& p#&h i"ati$" a"!#"epl$(e"t i" $pp$&ite !ire'ti$"&.

Other %a't$r& 'a" ae thi& tra!e$ $re $r le&&%a-$ra+le, +#t the tra!e$ i& al*a(& pre&e"t.


37/39

S U M M A R Y

The pri"'iple& $% !e'i&i$" ai"g are:

/e$ple %a'e tra!e$&.

The '$&t $% a"( a'ti$" i& eare! i" ter& $%%$reg$"e $pp$rt#"itie&.

0ati$"al pe$ple ae !e'i&i$"& +( '$pari"gargi"al '$&t& a"! argi"al +e"et&.

/e$ple re&p$"! t$ i"'e"ti-e&.




38/39

S U M M A R Y

The pri"'iple& $% i"tera'ti$"& a$"g pe$ple are:

Tra!e 'a" +e #t#all( +e"e'ial.

Maret& are #all( a g$$! *a( $% '$$r!i"ati"gtra!e.

$-t 'a" p$te"tiall( ipr$-e aret $#t'$e& i%there i& a aret %ail#re $r i% the aret $#t'$ei& i"e#ita+le.




39/39

S U M M A R Y

The pri"'iple& $% the e'$"$( a& a *h$le are:

/r$!#'ti-it( i& the #ltiate &$#r'e $% li-i"g&ta"!ar!&.

M$"e( gr$*th i& the #ltiate &$#r'e $% i"ati$".

S$'iet( %a'e& a &h$rt2r#" tra!e$ +et*ee"i"ati$" a"! #"epl$(e"t.

cap 1_10 principles.pptx

Documents

Transcript of cap 1_10 principles.pptx