...10 Principles of Economics Supply and Demand * Supply and demand are inversely proportional: When supply rises, demand falls. For instance, when the housing market in a certain region is flooded with homes for sale, sellers drop the price to attract a buyer. However, single homes for sale in exclusive neighborhoods might have more potential buyers than sellers. In these instances, the price of the home rises. Inflation and Unemployment * Gregory Mankiw, Harvard Economics professor and author of "Principles of Economics" explains that society experiences a short-run trade-off with rising prices and unemployment: As the monetary supply expands and inflation occurs, unemployment rises. However, the Phillips curve indicates that in the long-run, inflation has no bearing on levels of unemployment. Effects of Price Controls * Price controls, like setting food prices in the former Soviet Union or rent control in New York, have negative effects for both buyers and sellers. Price ceilings create shortages and rationing of goods, and price floors create disincentives to improve on the quality of a good when it cannot be sold at the equilibrium price. Elasticity * Elasticity measures price responsiveness of a good or service. If the demand for a product changes significantly when the price changes, it is considered elastic. Examples of elastic goods include makeup and concert tickets. Inelastic goods show little or no change in demand when the price changes. Examples...
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...changes mean small incremental adjustments to an existing plan of action. Compare marginal costs to marginal benefits. 4.People respond to incentives. People make decisions by comparing costs and benefits , their behavior may change when the costs and benefits change. When policymakers fail to consider how their policies affect incentives , they can end up with results they did not intend. The Law of Unintended Consequences. How people interact: 5. Trade Can Make Everyone Better Off. Economic isolation is not good. When isolated you have to do everything for yourself, even if you are not good at everything. Trade allows each person/country to specialize in the activities they do best. By trading with others, people can buy a greater variety of goods and services at a lower cost. 6. Markets are usually a good way to organize economic activity. Communism works on the premise that central planners in the government are in the best position to guide economic activity. These planners decide what goods and services are produced , how much is produced, and who produces what. A market economy allocates scare resources through the decentralized decisions of many firms and households as they interact in the market for...
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...Quiz Chapter 1-1 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Which of the following is NOT a basic economic question? |a. |WHAT to produce |c. |WHEN to produce | |b. |FOR WHOM to produce |d. |HOW to produce | ____ 2. What is the fundamental problem of economics? |a. |Scarcity |c. |capital | |b. |the factors of production |d. |labor | ____ 3. Which of the following lists the four factors of production? |a. |land, labor, wants, entrepreneurs |c. |land, labor, capital, scarcity | |b. |labor, needs, capital, entrepreneurs |d. |land, labor, capital, entrepreneurs | ____ 4. Which of the following is NOT a capital good? |a. |a bulldozer at a construction site | |b. |an oven at a bakery | |c. |a cash register at a clothing store ...
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...Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. John Maynard Keynes (1883-1946) Two fundamentals facts together constitute the economizing problem and provide a foundation for economics: Society’s economic wants and Economic resources. Individuals and institutions have innumerable unfilled wants and creating unstable economic conditions. Macroeconomic is concerned with the behavior of the economy as a whole; instead of focusing on the factors that influence the production of particular products and the behavior of individual industries, it focuses on the determinants of total national output. Macroeconomic is concerned with the decision. Decisions to achieve the economic goals, Sustainable economic growth, full level of employment, economic efficiency, price level stability, economic freedom, equitable distribution of income, economic security and balance of trade. OBJECTIVE Help the beginning student master the principles essential for understanding the economizing problem, specific economic issues, and the policy alternatives. Help the student understand and apply the economic...
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...College of Economics and Management 85 COLLEGE OF ECONOMICS AND MANAGEMENT Libornio S. Cabanilla, Dean Jose V. Camacho, Jr., Associate Dean Agnes T. Banzon, College Secretary Reynaldo L. Tan, Chair, Dept. of Agribusiness Management Cesar B. Quicoy, Chair, Dept. of Agricultural Economics Amelia L. Bello, Chair, Dept. of Economics The College of Economics and Management (CEM) was formally created in the 996th UP-BOR meeting, February 1987. However, the College traces its roots to the Institute of Agricultural Development and Administration (IADA)which was established in 1975, with three departments – Agricultural Economics (DAE), Economics (DE), and Management (DM), and was elevated to the College of Economics and Management from the merger of IADA with the Agricultural Credit and Cooperative Studies and the Agrarian Reform Institute in 1978. At present, CEM is composed of three departments – the Department of Agricultural Economics, the Department of Economics and the Department of Agribusiness Management. The college sees itself as a center of excellence in undergraduate and graduate instruction, research and extension in economics, agricultural and applied economics, and agribusiness management in Asia. It envisions to be an institution of higher learning that can serve as an active catalyst for economic and social transformation. Its two-fold mission is to produce graduates and future leaders with strong training in economics, agricultural and applied economics, and in agribusiness...
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...subject Principles of Economics 2. Subject code FSBN 102 3. Status of subject Core 4. Stage Foundation 5. Credit Hour 3 (3 hours per week x 14 weeks) 6. Pre-Requisite None 7. Assessment Coursework Examination Total Semester 1 : 60% : 40% : 100% 8. Semester 9. Objective of subject Economics subject aims to provide students with a basic introduction to the essential principles of Economics. In addition, it also provides students with the analytical tools necessary to understand both the domestic and international economic environment within which business organisations (public and private) operate. 10. Synopsis of subject The important reasons to study economics are to learn a way of thinking, to understand society, and to understand the global affairs. 11. Details of subject Week 1 Contents TOPIC: INTRODUCTION TO ECONOMICS Learning Outcomes: After attending the lesson, the students should be able to: • • • • • outline the reasons to study economics identify the scope and diverse fields of economics explain scarcity, choice and opportunity cost illustrate production possibility frontier compare and contrast types of economic systems Hours 3 Foundation Studies in Business, Stamford College Petaling Jaya 1 Activity: Tutorial questions Further reading for this lesson: Chapters 1 and 2 th Case, K. E., & Fair, R. C. (2005). Principles of Economics (7 ed.). Prentice-Hall. Chapter 1 th Sloman, J. (2003). Economics (5 ed...
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...Normative economics is the study of what the goals of the economy should be. Positive economics is the study of what is, and how the economy works . It explores the pure theory of economics, and it discovers agreed-upon empirical regularities. These empirical regularities are often called empirical facts—for example, large price fluctuations in financial markets tend to be followed by additional large price fluctuations. The three coordination problems any economy must solve are what to produce, how to produce it, and for whom to produce it. In solving these problems, societies have found that there is a problem of scarcity. • Deduction begins with almost self-evident principles and develops models and conclusions based on those principles. Induction looks at empirical evidence first and infers principles from those observations. Abduction is a combination of deduction and induction. • Economic reasoning structures all questions in a cost/benefit framework: If the marginal benefits of doing something exceed the marginal costs, do it. If the marginal costs exceed the marginal benefits, don’t do it. • Sunk costs are not relevant in the economic decision rule. • The opportunity cost of undertaking an activity is the benefit you might have gained from choosing the next-best alternative. Summary • “There ain’t no such thing as a free lunch” (TANSTAAFL) embodies the opportunity cost concept. • Economic forces, the forces of scarcity, are always working. Market forces, which...
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...Economic Decision to Purchase a House Our behaviors and decisions in our daily lives are affected by economics. When making decisions, we will use economic theories either consciously or subconscious to decide if we will make or reject that decision. The same can also be used to explain our actions and behaviors when making an economic decision to purchase a house. This paper will evaluate how economics affect one’s decision to purchase a new house. First, the decision to purchase a new house is considered a large and important decision by many. This is because the prices of houses are usually very high, and thus purchasing a new house will greatly deplete the savings of an individual. The demand of houses is highly price elastic. Economic theories state that the larger the proportion of income a certain purchase requires, the more price elastic the demand will be. In the case of the purchase of a new house, it will require the spending of a large proportion of an average person’s income, hence this will greatly lower the purchasing power of the individual when the decision is made to purchase the house. Furthermore, buying a new house will require people to shift from a familiar environment to a less familiar environment and this can be a life-changing experience which may be scary to some. Hence, these are all factors which make the purchase of a new house a very difficult decision to make. There are various principles of economics that can be applied to a decision to purchase...
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...person is more likely to apply for insurance than a low-risk person is. Moral hazard occurs because people have less incentive to be careful about their risky behavior after they purchase insurance. Gregory, M. (2012). The Basic Tools of Finance. Principles of Economics (7 ed., pp. 573-574). Stanford: Cengage Learning. 2. What is diversification? Does a stockholder get a greater benefit from diversification going from 1 to 10 stocks or going from 100 to 120 stocks? Diversification is the reduction of risk achieved by replacing a single risk with a large number of smaller unrelated risks. A stockholder will get more diversification going from 1 to 10 stocks than from 100 to 120 stocks. Gregory, M. (2012). The Basic Tools of Finance. Principles of Economics (7 ed., pp. 574-575). Stanford: Cengage Learning. 3. Comparing stocks and government bonds, which type of asset has more risk? Which pays a higher average return? Stocks have more risk because their value depends on the future value of the firm. So in return it will always have a higher risk; Stocks will have a higher return with the average of 8 percent a year and bond an average of 3 percent a year. Gregory, M. (2012). The Basic Tools of Finance. Principles of Economics (7 ed., pp. 575-576). Stanford: Cengage Learning 4. Is unemployment typically short term or long term? Explain. Unemployment is typically short term. Most Individuals who become unemployed are able to find them new jobs pretty quickly. Gregory...
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...How People Make Economic Decisions ECO/212 October 21, 2013 How People Make Economic Decisions The principles of individual decision-making are a set of concepts that broken in to four parts. These principles help us to understand some of the motivational factors which will help us understand the way consumers interact with other consumers in the market and to make strategic business decisions. The four principles are: "people face trade-offs," "the cost of something is what you give up to get it," "rational people think at the margin" and "people respond to incentives." In my line of work, I have to make decisions based on what is best for the customer and me because the more products I sell, the more money I make. I had a choice to place a 250 case display but I had to decide which specific size to put, either 24/12 or 24/10. I would make more money on the 24/12, but the store sells more 24/10. Instead of being greedy for the one time buy in, I decided that volume would be more important for me and the customer so I would continue to resell the display with the 24/10. The benefit with these decisions is that sometime the customer would run out of the product just with regular back stock, and now they can handle more volume and will less likely run out of inventory with the display in hopes to sell more products. The incentives that could have made me make a different decision is that if I could have sold more 24/12 I would put those on display simply because I would...
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...ECO 100 – Principles of Economics COURSE DESCRIPTION Presents a survey of basic macro- and microeconomic principles and concepts. Reviews the economic dynamics of market forces affecting competition, different economic systems, the role of government in the economy, and economic aspects of international trade. Discusses the labor market, interest rates and the supply of money, and performance of a national economy. Examines the use of economics in business decisions, considering such principles as opportunity costs, diminishing returns, and the marginal principle. INSTRUCTIONAL MATERIALS Required Resources O'Sullivan, A., Sheffrin, S., & Perez, S. (2012). Survey of economics: Principles, applications, and tools (5th ed.). Upper Saddle River, NJ: Pearson-Prentice Hall. MyEconLab book key Note: This book key comes with the purchase of a new textbook and is needed in order to access MyEconLab. Supplemental Resources Aaronson, D., Mazumder, B., & Schechter, S. (2010). What is behind the rise in long-term unemployment? Economic Perspectives, 34(3/4), 28-51. Andreyeva, T., Long, M. W., & Brownell, K. D. (2010). The Impact of Food Prices on Consumption: A Systematic Review of Research on the Price Elasticity of Demand for Food. American Journal of Public Health, 100(2), 216-22 Heyne, P., Boettke, P. J., & Prychitko, D. L. (2010). The economic way of thinking. (12th ed.). Upper Saddle River: Pearson-Prentice Hall. High, J. (2011). Economic Theory and the Rise of Big Business in...
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...Economic Decision to Purchase a House Our behaviors and decisions in our daily lives are affected by economics. When making decisions, we will use economic theories either consciously or subconscious to decide if we will make or reject that decision. The same can also be used to explain our actions and behaviors when making an economic decision to purchase a house. This paper will evaluate how economics affect one’s decision to purchase a new house. First, the decision to purchase a new house is considered a large and important decision by many. This is because the prices of houses are usually very high, and thus purchasing a new house will greatly deplete the savings of an individual. The demand of houses is highly price elastic. Economic theories state that the larger the proportion of income a certain purchase requires, the more price elastic the demand will be. In the case of the purchase of a new house, it will require the spending of a large proportion of an average person’s income, hence this will greatly lower the purchasing power of the individual when the decision is made to purchase the house. Furthermore, buying a new house will require people to shift from a familiar environment to a less familiar environment and this can be a life-changing experience which may be scary to some. Hence, these are all factors which make the purchase of a new house a very difficult decision to make. There are various principles of economics that can be applied to a decision to...
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... PRINCIPLES OF MICRO-ECONOMICS COURSE OUTLINE – FALL 2012 CREDIT HOURS DURATION DEPARTMENT COURSE LEVEL RESOURCE PERSON OFFICE HOURS E-MAIL 3 17 weeks Finance and Business Economics Division Core Prof. Taimoor Qureshi By Appointment taimoor.qureshi@ucp.edu.pk COURSE DESCRIPTION Principles of Microeconomics is an introductory course that teaches the fundamentals of microeconomics. This course introduces microeconomic concepts and analysis, supply and demand analysis, theories of the firm and individual behavior, competition and monopoly, and welfare economics. Students will also be introduced to the use of microeconomic applications to address problems in current economic policy throughout the semester. COURSE OBJECTIVES After studying this course the students should be able to: Understand the basic concepts of the subject. Understand the application of the tools of demand and supply for efficient resource allocation and profit maximization. Identify core economic issues related to business firms. Comprehend the benefits of market efficiency. GRADING PLAN TYPE Quizzes Assignments Final Projects Midterm examination Final term examination Total PERCENTAGE (%) 10 10 10 30 40 100 CALENDER OF ACTIVITIES WEEK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 CONTENTS TASKS/ACTIVITIES Introduction to Economics • Basic Concepts – I Class Introduction Introduction to Economics • Basic Concepts...
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...profits in order to gain the best return they can on their investments. Maximizing profits helps to facilitate the longevity and survivability of a company because it provides the company the ability to expand their business, borrow money, attract investors, and hire more employees. Understanding when or if the company is profitable can be somewhat overwhelming at first, but by applying the principals of total revenue, total cost, marginal revenue, and marginal costs the process of determining profitability is simplified greatly. In order to understand how the principles of economics affect the profitability of a company it is important to understand what each principal is. The first principle, total revenue can be summarized as, the price of a unit sold multiplied by the number of units sold. For example if the price per unit sold is $10 and the firm sells 10 units, the total revenue is $100. The next principle, total cost, is defined by McConnell, Brue, and Flynn (2012) as, “the sum of fixed costs and variable costs” (p. 35). Fixed costs are items that do not change when output is changed and can include items such as real estate, utilities, loan payments, and government fees. Variable costs on the other hand are the opposite of fixed cost and include the costs associated with an increase in output (McConnell, Brue, Flynn, 2012, p. 148). Examples of variable costs could include items such as materials, production supplies, and direct labor. Using total revenue to total...
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...Principles of Microeconomics: At a Glance Description of the Examination The Principles of Microeconomics examination covers material that is usually taught in a one-semester undergraduate course in introductory microeconomics. This aspect of economics deals with the principles of economics that apply to the analysis of the behavior of individual consumers and businesses in the economy. Questions on this exam require test-takers to apply analytical techniques to hypothetical as well as real-world situations and to analyze and evaluate economic decisions. Test-takers are expected to demonstrate an understanding of how free markets work and allocate resources efficiently. They should understand how individual consumers make economic decisions to maximize utility, and how individual firms make decisions to maximize profits. Test-takers must be able to identify the characteristics of the different market structures and analyze the behavior of firms in terms of price and output decisions. They should also be able to evaluate the outcome in each market structure with respect to economic efficiency, identify cases in which private markets fail to allocate resources efficiently, and explain how government intervention fixes or fails to fix the resource allocation problem. It is also important to understand the determination of wages and other input prices in factor markets, and to analyze and evaluate the distribution of income. The examination contains approximately 80 questions...
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