Montesclaros, Ian Isidro P. MICROECONOMICS ME13 Sept.
3, 2019
10 PRINCIPLES OF ECONOMICS
People face Trade offs
This refers to the concept of making compromises. A person may have to give something up
to get something else they want more. In other words, making decisions requires trading off
one goal against another. For example, I can spend all of my time studying and also spend all
of my time sleeping. Therefore, for every hour I used my time studying, I give up an hour that
I could have used to sleep.
The cost of something Is what you give up to get it
Making decisions requires comparing the cost and benefits of alternative choices. In other
words, you have to give up something to have a greater opportunity. You have to take a risk
even if it has a greater chance your business to go down or corrupt for something that will
also benefit your business in the future. For example, the highly advancing business in our
present times, Frontrow. That you to invest a lot of money but it will somehow grow or
success in the future.
Rational People think at the Margin
A rational decision-makers takes action if and only if the marginal benefit of the action exceed
the marginal cost. Marginal thinking is to make small adjustments. Rational people means,
people who systematically and purposefully do the best they can to achieve their objectives.
People respond to Incentives
People respond to different incentives in good or bad ways, but the point is that we respond.
They get the task if there was a reward or pay. For example, the boss of your company have
many work and he decided to assign the task to his employees. Because of incentives, The
boss was able to persuade his employees into helping finish all task.
Trade can make everyone better off
It is sharing knowledge, inventions, ideas and changing one’s idea into another for developing
and building connections to one another, for increasing economical society and for the
progress of the society. For example, trade between two countries. America and china trade
goods that they have produce abundance off. For instance America trade airplanes in china,
while china trade computers in America. So they each trade to maximize the utility of
consumption for their people.
Markets are usually a good way to organize Economic activity
Markets are defined simply as a place where people make an agreement, settle on a price
and then communicate that to the world at large. The food market, for example, farmers
making an agreement to sell at a set price and then supermarkets communicate that by selling
the food to the public.
Government can sometimes improve market outcomes
Government are important for one reason, The inforce certain rights. For example, efficiency,
Effeciency are inlarged economy, market sometimes fails to produce the maximum capacity
and we called that the market failure. The possible cause of it are externality, For example,
smoking cigarettes can harm the person using it and it can also harm the people that surround
him as well. Another cause of market failure is the concept of market power or the abuse of
such powers. Let’s go back to smoking example. In order to reduce the harmful effect of
smoking, the government will do some policies. They can raise prices of cigarettes or limit
smoking locations. Government can improve the market outcomes but it does not mean it
will always do so. It is not guaranteed that government have a positive effect in market
outcomes.
A country’s Standard of living depends on its ability to produce good and services
Simply put, this principle is productivity. The richer the country, the higher the level of
productivity. The reason why some countries are rich because of their ability to produce more
output per worker, per hour. They have also many factories, resources and it helps the
country more productive.
Prices rise when the Government prints too much money
This principle refers to inflation. Prices go up to reflect the amount of money being printed.
While the more money makes people think they’re wealthier, inflation causes prices to go up
and that money loses some of its value.
Society faces a Short-run trade off Between Inflation and unemployment
this principle says that you can’t keep unemployment low and inflation under control at the
same time and, therefore, create a tradeoff. The inflation rate depends mainly on growth in
the money supply. Unemployment depends on the minimum wage, the market power of
efficiency wages. And the process of job search.
