1-1 How People Make Decisions
1-1a Principle 1: People Face Trade-offs
1-1b Principle 2: The Cost of Something Is What You Give Up to Get It
1-1c Principle 3: Rational People Think at the Margin
1-1d Principle 4: People Respond to Incentives
1-2 How People Interact
1-2a Principle 5: Trade Can Make Everyone Better Off
1-2b Principle 6: Markets Are Usually a Good Way to Organize Economic Activity
1-2c Principle 7: Governments Can Sometimes Improve Market Outcomes
1-3 How the Economy as a Whole Works
1-3a Principle 8: A Country's Standard of Living Depends on Its Ability to Produce Goods and Services
1-3b Principle 9: Price Rise When the Government Prints Too Much Money
1-3c Principle 10: Society Faces a Short-Run Trade--off between Inflation and Unemployment
Summary
- The fundamental lessons about individual decision making are that people face trade-offs among alternative goals, that the cost of any action is measured in terms of forgone opportunities, that rational people make decisions by comparing marginal cost and marginal benefits, and that people change their behavior in response to the incentives they face.
- The fundamental lessons about interactions among people are that trade and interdependence can be mutually beneficial, that markets are usually a good way of coordinating economic activity among people, and that the government can potentially improve market outcomes by remedying a market failure or by promoting greater economic equality.
- The fundamental lessons about the economy as a whole are that productivity is the ultimate source of living standards, that growth in the quantity of money is the ultimate source of inflation, and that society faces a short-run trade-off between inflation and unemployment.
Scarcity: the limited nature of society resources.
Economics: The study of hos society manages its scare resources.
Efficiency: The property of society getting the most it can from its scarce resources.
Equality: The property of distributing economic prosperity uniformly among the members of society
Economics: The study of hos society manages its scare resources.
Opportunity Cost: Whatever must be given up to obtain some item.
Rational People: People who systematically and purposefully do the best they can to achieve their objectives.
Marginal Change: A small incremental adjustment to a plan of action.
Incentive: Something that induces a person to act.
Market Economy: An economy that allocates resources though the decentralized decisions of many firms and households as they interact in markets for goods and services.
Property Rights: The ability of an individual to own and exercise control over scarce resources.
Market Failure: A situation in which a market left on its own fails to allocate resources efficiently.
Externality: The impact of one person's actions on the well-being of a bystander.
Market Power: The ability of a single economic actor (or small group of actors) to have a substantial influence on market prices.
Productivity: The quality of goods and services produced from each unit of labor input.
Inflation: An increase in the overall level of prices in the economy.
Business Cycle: Fluctuations in economic activity, such as employment and production.
Vocabulary
attain - succeed in achieving (something that one desires and has worked for).
aspire - direct one's hopes or ambitions toward achieving something.
scarce - (especially of food, money, or some other resource) insufficient for the demand.
Note: The sole purpose of this blog is to take notes while I'm studying and have access to it anywhere. I have no intention to publish third party materials for any other benefits.
