TAILIEUCHUNG - Lecture Principles of economics (Asia Global Edition) - Chapter 1

Chapter 1 - Thinking like an economist. This chapter to show that the Cost-Benefit Principle, deciding whether to take an action by comparing the cost and benefit of the action, is a useful approach for dealing with the inevitable trade-offs that scarcity creates. After discussing several important decision pitfalls, the chapter concludes by describing the Incentive Principle and introducing the concept of economic naturalism. | Thinking Like an Economist Chapter 1 Copyright © 2015 by McGraw-Hill Education (Asia). All rights reserved. McGraw-Hill/Irwin 1 Learning Objectives Explain and apply the Scarcity Principle Explain and apply the Cost-Benefit Principle Discuss three important pitfalls that occur when applying the Cost-Benefit Principle inconsistently Explain and apply the Incentive Principle The Scarcity Principle 3 The Scarcity Principle: Examples 4 The Cost-Benefit Principle Take an action if and only if the extra benefits are at least as great as the extra costs Costs and benefits are not just money 5 Applying the Cost – Benefit Principle Assume people are rational A rational person has well defined goals and tries to fulfill those goals as best they can Would you walk to town to save $10 on an item? Benefits are clear Costs are harder to define Hypothetical auction Would you walk to town if someone paid you $9? If you would walk to town for less than $10, you gain from buying the item in town 6 Cost – Benefit Principle Examples 7 Economic Surplus The economic surplus of an action is equal to its benefit minus its costs 8 Opportunity Cost Opportunity cost is the value of what must be foregone in order to undertake an activity Consider explicit and implicit costs Examples: Give up an hour of babysitting to go to the movies Give up watching TV to walk to town Caution: NOT the combined value of all possible activities Opportunity cost considers only your best alternative 9 Economic Models Simplifying assumptions Which aspects of the decision are absolutely essential? Which aspects are irrelevant? Abstract representation of key relationships The Cost-Benefit Principle is a model If costs of an action increase, the action is less likely If benefits of an action increase, the action is more likely 10 Three Decision Pitfalls Economic analysis predicts likely behavior Three general cases of mistakes Measuring costs and benefits as proportions instead of absolute amounts Ignoring implicit

• Kinh tế học
• Principles of economics
• Lecture Principles of economics
• Market imperfections
• The international economy
• Scarcity principle
• Cost benefit principle
• Ten principles of economics
• People face tradeoffs
• Opportunity cost
• Marginal changes
• Economics of information
• Consumer choice
• Free rider problem
• Market transactions
• Welfare Economics
• Consumer surplus
• Demand curve
• Efficiency of markets
• Nature of an externality
• Market inefficiency
• Negative externalities
• Principles of microeconomics
• Lecture Principles of microeconomics
• Scarce resources
• Scarcity implies choice
• Choice implies cost
• Principles of agricultural economics
• Agricultural economics
• Economics of agricultural production
• Theory of consumer behaviour
• Economics of market demand
• Dynamics in demand analysis
• Analysis of agricultural markets
• Agricultural markets
• Economics of trade
• Costs of taxation
• Deadweight loss
• Laffer curve
• Supply side economics
• Market forces
• Supply and demand
• Market economies
• Competitive Markets
• Thinking like an economist
• Economic models
• Circular flow diagram
• Production possibilities frontier
• The gains from trade
• Production possibilities
• Comparative advantage
• Absolute advantage
• Costs of production
• Total revenue
• Total cost
• Opportunity costs
• Price elasticity of demand
• Price elasticity
• Midpoint method
• Demand curves
• Factors of production
• Demand for labor
• Production function
• Marginal product of labor
• Controls on prices
• Price ceiling
• Price floor
• Market outcomes
• Theory of consumer choice
• Budget constraint
• Indifference curve
• Marginal rate of substitution
• Measuring nation’s income
• Economy’s income
• Gross domestic product
• Components of GDP
• International trade
• Determinants of trade
• Equilibrium without trade
• Production and growth
• Economic growth
• Monetary system
• Functions of money
• Federal reserve
• Central bank
• Open economy macroeconomics
• Economy macroeconomics
• Closed economy
• Open economy
• Public goods
• Common resource
• Types of goods
• Cost benefit analysis
• Aggregate demand
• Aggregate supply
• Short run economic fluctuations
• Economic fluctuations
• Tax system
• Federal Government
• Marginal tax rate
• Budget surplus
• Macroeconomic policy
• Debate over macroeconomic policy
• Stabilize the economy
• Monetary policy