Micro
8/5/2013
PowerPoint® Lecture Presentation to accompany
Principles of Economics, An Asian Edition
N. Gregory Mankiw | Euston Quah | Peter Wilson
© 2008 Cengage Learning
1
TEN PRINCIPLES OF ECONOMICS
© 2008 Cengage Learning
1
8/5/2013
Economy. . . . . . The word economy comes from a Greek word for “one who manages a household.”
© 2008 Cengage Learning
TEN PRINCIPLES OF ECONOMICS
A household and an economy face many decisions:
Who will work? What goods and how many of them should be produced? What resources should be used in production? At what price should the goods be sold?
© 2008 Cengage Learning
2
8/5/2013
TEN PRINCIPLES OF ECONOMICS
• Society and Scarce Resources:
• The management of society’s resources is important because resources are scarce. • Scarcity. . . means that society has limited resources and therefore cannot produce all the goods and services people wish to have.
© 2008 Cengage Learning
TEN PRINCIPLES OF ECONOMICS
Economics is the study of how society manages its scarce resources.
© 2008 Cengage Learning
3
8/5/2013
HOW PEOPLE MAKE DECISIONS
• People face trade-offs. • The cost of something is what you give up to get it. • Rational people think at the margin. • People respond to incentives.
© 2008 Cengage Learning
Principle #1: People Face Trade-offs. • “There is no such thing as a free lunch!”
© 2008 Cengage Learning
4
8/5/2013
Principle #1: People Face Trade-offs. • To get one thing, we usually have to give up another thing.
• • • • Guns v. butter Food v. clothing Leisure time v. work Efficiency v. equity
Making decisions requires trading off one goal against another.
© 2008 Cengage Learning
Principle #1: People Face Trade-offs • Efficiency v. Equity
• Efficiency means society gets the most that it can from its scarce resources. • Equity means the benefits of those resources are distributed fairly among the members of society.
© 2008 Cengage
PowerPoint® Lecture Presentation to accompany
Principles of Economics, An Asian Edition
N. Gregory Mankiw | Euston Quah | Peter Wilson
© 2008 Cengage Learning
1
TEN PRINCIPLES OF ECONOMICS
© 2008 Cengage Learning
1
8/5/2013
Economy. . . . . . The word economy comes from a Greek word for “one who manages a household.”
© 2008 Cengage Learning
TEN PRINCIPLES OF ECONOMICS
A household and an economy face many decisions:
Who will work? What goods and how many of them should be produced? What resources should be used in production? At what price should the goods be sold?
© 2008 Cengage Learning
2
8/5/2013
TEN PRINCIPLES OF ECONOMICS
• Society and Scarce Resources:
• The management of society’s resources is important because resources are scarce. • Scarcity. . . means that society has limited resources and therefore cannot produce all the goods and services people wish to have.
© 2008 Cengage Learning
TEN PRINCIPLES OF ECONOMICS
Economics is the study of how society manages its scarce resources.
© 2008 Cengage Learning
3
8/5/2013
HOW PEOPLE MAKE DECISIONS
• People face trade-offs. • The cost of something is what you give up to get it. • Rational people think at the margin. • People respond to incentives.
© 2008 Cengage Learning
Principle #1: People Face Trade-offs. • “There is no such thing as a free lunch!”
© 2008 Cengage Learning
4
8/5/2013
Principle #1: People Face Trade-offs. • To get one thing, we usually have to give up another thing.
• • • • Guns v. butter Food v. clothing Leisure time v. work Efficiency v. equity
Making decisions requires trading off one goal against another.
© 2008 Cengage Learning
Principle #1: People Face Trade-offs • Efficiency v. Equity
• Efficiency means society gets the most that it can from its scarce resources. • Equity means the benefits of those resources are distributed fairly among the members of society.
© 2008 Cengage