1. 10 Econ. Principles Flashcards
economy
“one who manages a household”
Greek origin
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
scarcity
the limited nature of society’s resources
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
economics
the study of how society manages its scarce resources
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
4 principles of individual decisionmaking
- people make tradeoffs
- the cost of something is what you give up to get it
- rational people think at the margin
- people respond to incentives
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
- people make tradeoffs
trading off one goal against another
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
- the cost of something is what you give up to get it
comparing costs and benefits of alternative courses on action
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
- rational people think at the margin
small incremental adjustments to an existing plan of action
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
- people respond to incentives
behavior may change when costs or benefits change
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
efficiency
society getting most it can from scarce resources
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
equity
distributing economic prosperity fairly among the members of society
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
opportunity cost
whatever must be given up to obtain some item
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
marginal changes
small incremental adjustments to a plan of action
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
QUICK QUIZ
list and briefly explain 4 principles of individual decision-making
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
principles 1-4
discuss individual decision-making
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
principles 5-8
discuss people interacting with one another
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
- trade can make everyone better off
trade between two parties can make each country better off
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
- markets are a good way to organize economic activity
…promotes overall economic well-being
Adam Smith’s “invisible hand”, 1776, An Inquiry into the Nature and Causes of the Wealth of Nations.
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
market economy
an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
- governments can sometimes improve market outcomes
- to promote efficiency
- to promote equity
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
market failure
a situation in which a market left on its own fails to allocate resources efficiently
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
externality
the impact of one person’s actions on the well-being of a bystander
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
market power
the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
QUICK QUIZ
list and briefly explain the 3 principles concerning economic interactions
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
principles 8-10
workings of the economy as a whole
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
- a country’s standard of living depends on its ability to produce goods and services
almost all variation in living standards is attributed to differences in a country’s productivity
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
productivity
the amounts of goods and services produced from each hour of a worker’s time
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
- prices rise when the government prints too much money
in almost all cases of large of persistent inflation, the culprit turns out to be the same - growth in the quantity of money
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
inflation
an increase in the overall level of prices in the economy
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
- society faces a short-run tradeoff between inflation and unemployment
reducing inflation is often thought to cause a temporary rise in unemployment
- see Phillips curve
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
Phillip’s curve
shows the short-run tradeoff between inflation and unemployment
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
QUICK QUIZ
list and briefly explain the 3 principles that describe how an economy works as a whole
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
Table of 10 Principles of Economics
page 15
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
possible test questions
pages 16 & 17
Mankiw, N. (2023). Principles of Economics (second edition, 3-17). Macmillan Learning Inc.
