...Class-1 Ten Principles of Economics Economy. . . . . . The word economy comes from a Greek word-Oekonomous- for “one who manages a household.” Any similarity between household and economics? Copyright © 2004 South-Western/Thomson 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? Copyright © 2004 South-Western/Thomson Learning 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. Copyright © 2004 South-Western/Thomson Learning TEN PRINCIPLES OF ECONOMICS Economics is the study of how society manages its scarce resources. Copyright © 2004 South-Western/Thomson Learning TEN PRINCIPLES OF ECONOMICS • How people make decisions. • • • • People face tradeoffs. The cost of something is what you give up to get it. Rational people think at the margin. People respond to incentives. Copyright © 2004 South-Western/Thomson Learning TEN PRINCIPLES OF ECONOMICS • How people interact with each other. • Trade can make everyone better off. • Markets are usually a good way to organize economic activity. • Governments can sometimes improve...
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...Ten Principles of Economics and How Markets Work 365/ECO July 18, 2016 University of Phoenix Ten Principles of Economics and How Markets Work Economics is the study of how society manages its resources, and how they are allocated (Mankiw, 2015). People must understand how the markets, trade, and government can affect items like inflation, investing, and their standard of living. Frequently, the government will interfere with the natural flow of the supply and demand curve creating ripples in the economy that will take years to readjust to normalcy. Resources, interdependence and the supply and demand curve People and governments must decide what to spend money on, and that decision always comes with a tradeoff (Mankiw, 2015). The text notes that one trade off is between efficiency and equality. Efficiency is getting the most it can from the scarce resources and equality is ensuring the resources are distributed among all members of the society. Where one person may choose to pay more for a home, another person may choose a lesser home to have the ability to travel more. When government gets involved the tradeoffs are the goals of efficiency and equality often find conflict. Countries and governments are becoming increasingly interdependent, and it has tradeoffs (Mankiw, 2015). Interdependence allows for all areas of the world to maintain a standard of living, produce goods, and trade with other communities around the world. When all...
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...How People Make Economic Decisions Francisca A. Castellanos ECO212 January 18, 2011 Evanthis (Pete) Mavrokordatos How People Make Economic Decisions Decisions, decisions, decisions…Decisions are the worst, and yet we must make them each and every day. The ten principles of economics explains how people make decisions, how people interact, and how the economy as a whole works. Economics is a behavioral science, which studies how societies manage their scarce resources (Hubbard-O’Brien, Glossary). Societies have different economic interactions that are affected by the type of economic system present. The main attributes of each system are as follows. In a market economy decisions of households and firms interacting in markets allocate economic resources (Glossary). In a centrally-planned economy the government decides how economic resources will be allocated (Glossary) and in a mixed economy economic decisions result from the interaction of buyers and sellers in markets but the government plays a significant role in the allocation of resources (Glossary). My small society (household) depends on me to allocate our scarce resources (monetarily), taking into account our abilities, efforts, and desires. My husband makes decisions based on our emotional needs as a family, yet both parts are equally important. How People Make Decisions Principle One: People face trade-offs. Making decisions requires trading off one item for another. I face this dilemma all the time because...
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...Economic Decision Making Renice Taylor ECO/212 Monday, February 14, 2011 Anusuya Chatterjee Economic Decision Making Today, every individual must make a decision in his or her lifetime. However, every individual does not make decisions in the same manner. In economics, there are four major principles of decision-making: “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” (Ten Principles, n.d., pgs. 4-7). “People face trade-offs” is simply the concept of giving up one thing that we like for another. “The cost of something is what you give up to get it” means that cost will always be a factor. However, it should not be the only one. “Rational people think at the margin” refers to individuals thinking in shades of gray. “People respond to incentives” deals with the majority of middle-class citizens. Many individuals will hold on to their money until a sale comes along. Recently, my husband and I were in the process of deciding whether to lease a new sports utility vehicle or finance an older one. The benefits of leasing will be driving a new vehicle. There are no worries of damage done with the previous owner, accidents, etc. However, after looking at the marginal costs...
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...of personal wealth. All ten of the principles of economics are directly related to the decision to purchase a house on some level. These economic principles will have an impact on the purchasing decision and the long term financial aspects of home ownership so it is wise to incorporate these ten principles into the decision making process to ensure a sound financial decision is the outcome. When considering the purchase of a house, the ten principles of economics that need to be addressed can be broken down into three stages of the decision making process. The first step is to examine how the decision is made by incorporating the first four principles of economics which include, the trade off that comes with every financial decision, the real cost of any item or service is what is given up to get the item or service, rational people think at the margin, and people respond to incentives. Once it is clear how the decision is made, the next three principles of economics address how people interact with economics and include factors such as, trade is beneficial to everyone, markets are a good way to organize economic activity, and the government can improve the markets with fiscal policy and all three will have an impact on the decision to purchase a home. The final leg of the decision making process includes taking into consideration the last three economic principles which speak to how the economy works as a whole and include economic principles such as, a country's...
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...The decision to purchase a house is one of the most important decisions, and largest purchases an individual will ever have to make. There are many factors to take in to consideration, and I am now finding myself having to go through the process for the first time. There are ten principles of economics and I have found all ten of them to be quite necessary and beneficial in my decision. A larger living space is most certainly needed regardless, but I have many things to think over first. These principles have helped me to decide if now is the right time in our economic state to purchase, or to continue renting. The first factor that needs to be taken in to consideration is budget. Will I even be able to afford a home? Once taking my income and subtracting my expenses, I will have a ballpark estimation as to what I will be able to afford monthly for a mortgage. However, it is not that easy to figure. I also have to take in to consideration the things, (expense wise) that I will have to give up. There will most certainly be things I will have to give up to possibly make the mortgage. For instance, I will be paying more for utilities, so I may have to give up cable television to make up the difference. I will also have to think of the additional expenses that come with owning a home and also having a child. Location is a big factor in the purchasing of a home. As of now, I am not in an area that is really child- friendly. I have no local schools...
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...Summary Many companies’ executives are concentrated on short-term financial performances rather than long-term development. As a result, they always miss the opportunities to create values for their companies and their shareholders. In this article, the author, noted professor emeritus Alfred Rappaport, set out ten basic governance principles for companies to realize the potential of creating shareholder value. In the real world, there is only Berkshire Hathaway that is likely to implement all these principles. It is obvious that more and more CFOs and other top executives followed Berkshire Hathaway's legendary CEO, Warren Buffet, management skills by following his footsteps to enhance shareholder value. Based on many research and several decades of consulting experience, the author suggests to executives ten maximizing shareholder value principles. For example: Do not provide earnings guidance or manage earnings Try to make shareholder value-maximizing strategic decisions Grasp any opportunities to create shareholder value Focus on high value-added activities (e.g., marketing, design, research) in order to reduce capital expenditures Return cash to the shareholders when there are no opportunities to create value Reward employees in order to motivate them to maximize the potential for high returns Management ignoring long-term considerations because the average time for holding stocks at professionally managed funds is only one year. Investors are usually...
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...think about and discuss our options of whether we want to rent first to save up money for a down payment or if we feel it is in our best interest to look into buying our home now. This is one of the biggest and most important decisions we will make in our lives, besides getting married and having children, because when you buy a home there is not just the substantial amount of money that is needed as a down payment, but there are other expenses that go along with home ownership. Aside from the financial aspect that figures into our decision, there are several others we need to take into consideration as well. For instance, since I am currently studying economics in college, it has been brought to my attention throughout the class that it is vitally important to have a basic knowledge of the ten principles of economics and to know which of them relates to the decision of purchasing a home. Also, the strength of the economy, not just...
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...Unit One: Introduction Chapter 1: Ten Principles of Economics Learning Objectives * Learn that economics is about the allocation of scarce resources * Examine some of the trade-offs that people face * Learn the meaning of opportunity cost * See how to use marginal reasoning when marketing decisions * Discuss how incentives affect people’s behavior * Consider why trade among people or nations can be good for everyone * Discuss why markets are good, but not perfect, way to allocate resources * Learn what determines some trends in the overall economy Ten Principles of Economy * Management of society’s resources is important because resources are scarce * Scarcity – limited nature of society’s resources * Economics – study of how society manages its scarce resources How People Make Decisions Principle #1: People Face Trade-offs * To get one thing we like, we must give up another. Making decisions requires trading off one goal against another * Classic trade-off is between “guns and butter”. The more we spend on national defense, the less we spend on consumer goods to raise our standard of living at home * Trade-off between a clean environment and a high level of income is another modern conflict. Pollution regulations raise the cost of producing goods and services, causing firms to earn smaller profits, paying lower wages, charging higher prices, ect… * Another trade off society faces is efficiency and equity. Efficiency...
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...reduced price so how does this milestone still hold up to scrutiny and how can this generation still reach for that goalpost of what is considered the standard of the happy nuclear family? The decision to purchase a home is the major point in an American life and it is a decision that should not be taken lightly because if not done correctly and with a plan on how to sustain the purchase that is not solid the consequences could be dire. After taking this course I have found out that there are methods and concepts that if implemented correctly the idea of owning a home is still within grasp of many of us but there are many things that need to be weighed before pulling the trigger on such a large and momentous decision. First are the ten principles of economics which I will go into more detail later on that are crucial to making a large purchase be it a home, car, or any other large ticket item that can have ramifications on other aspects of your lives. Next one needs to weigh the marginal costs and marginal benefits of their decision to see all aspects of the decision no matter how minute they may seem. There needs to be an understanding of the state of the current economy as well as the trends that point to where the economy may be going in the foreseeable future so that the timing...
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...Economics of Daily Life Economics of Daily Life Economics is a study of how society manages its scarce resources. The literal translation for economy is “one who manages a household.” “In an increasingly complex world connected by social and economic interaction and interdependence, news of stock market fluctuations, consumer confidence scores, and various economic indicators fill the media” (Broome & Preston-Grimes, 2011). This means that economics is everywhere, even in a home. Every household makes decisions that follow the economic principles. There are tradeoffs, and incentives. Supply and demand regularly show up in a household setting, as do decisions regarding limits on price and time. I am a single mom and the science of economics is a daily occurrence, at the grocery store, while doing homework, and in my choice of home and bills. Economics is an inevitable part of most people’s daily lives. It occurs in every facet of home, work, and school. There are ten principles to economics. They are the decisions that need to be made in regards to the jobs that need to be done, and the management of the resources that will allow the necessities to be provided. One of the principles that occur most in my daily life is tradeoffs. Tradeoffs occur when a person has to choose between one thing and another, forgoing one desirable option, for the more beneficial, sometimes undesired option. In a study done in 2011, a Montessori middle school set up a school store. Some...
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...A New House - Decision Tonya L. Pugh XECO/212 ECONOMIC THEORY May 6, 2012 Frederick C. Runge, MBA, PMP Growing up all I ever dreamed of was one day to get married to the perfect man, have two perfect little children, and to own my own perfect little house. I did not follow that order when getting these things; however, at thirty six years old I do have it. I am a wife, and no man is perfect I have learned. I am a mother to three beautiful and healthy children, an eighteen year old daughter and twins (girl and boy) who are nine. The house, which is perfect for us in its own right, is coming now, after a lot of hard work and sweat, not to mention a lot of planning and decision making. Locating a house in an area we want to live in is the easiest part of looking for our new home. My husband and I have chosen to stay in the area we are currently living in and renting a home. Everyone here is close and we all look out for one another. My parents are not far, so they can get our children from school and watch them until we get home from work. The local elementary and middle school is within walking distance from the houses we are looking at, as well as the local hospital, fire and police departments, church and local health clinic. Before we move any further in buying our home we need to sit down and make a list of the pros and cons for buying and renting. This is now the biggest decision we are facing in our lives and what we decided will affect us for a long time to come. We need...
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...course will require a bigger space and moving into a bigger apartment is not an option. A lot of people believe buying a home is finding the home you fall in love with, have a good credit score, and save money to put down on the house. In reality a lot more needs to be considered when purchasing a new home. The principles of economics are something people should consider because it gives food for thought. I think all ten principles of economics are important and beneficial when making the decision of purchasing a home. I have printed them out as a reminder of what to keep in mind when purchasing a home. The first principle people face trade-offs is one that will impact my decision. For the last four years I had been working a full and part time job. The last two years I have been in school and as class got tougher it required more time for education. In 2012 I had to stop working my part time job to focus on school which has the overall greater impact. Towards the middle of the year my company promoted me to a higher level. My progress in school helped me to get my promotion and that was the trade off. I lost a little money temporarily but make more than I ever did. Principle two is the cost of something is you give up to get it. I have to analyze how my money is really being spent and if I am gaining any benefits. My one bedroom cost $1,000 a month and includes water, gas, and trash. For $1,000 a month I could purchase a four bedroom home but utilities...
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...economy, or making procedural changes to improve compliance. The most important question is how should proposed changes be analyzed? The American Institute of Certified Public Accountants (AICPA) has issued suggestions for Federal tax policy. The suggestions analyze fundamental tax-reform proposals. AICPA determined that the proposal debate was missing an analytical framework to determine whether the proposals incorporated principles of "good" tax policy. AICPA created a framework to present the principles of a good tax system; it can be used both to analyze proposals and to modify them (if necessary), so that any changes will strengthen the tax system, rather than weaken it. It can also serve to identify and design improvements to the tax system. The framework can be used to analyze tax proposals of any size, degree and at any government level. The framework is titled “Guiding Principles of Good Tax Policy: A Framework for Evaluating Tax Proposals. Sets 10 tax principles that are commonly used as indicators of desirable tax policy. Incorporating those principles into the...
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...I am currently renting a studio apartment with my boyfriend. We have also just found out that we are expecting our first child, therefore our apartment is not going to be big enough for our growing family. We are discussing buying our first home and how we are going to afford it. When looking at the ten principles of economics, the first one that we will use to our advantage is principle 6-Markets are usually a good way or organize economic activity. Right now, the housing market is our area is very soft. Lots of homes available at very good prices and a lot of lenders looking to lend money to people at great rates. Another principle that comes into play in principle 1-Tradeoff. While you may gain things from the purchase, you will lose other things that you need to take into account when making your decision. Home ownership gives you a sense of pride and you are able to make whatever changes to the house and property that you want, but now that you are a homeowner you are responsible for all repairs and upgrades needed, there will no longer be a landlord to call when something breaks. That brings up marginal costs and benefits. Are the benefits of owning a home going to be outweigh the costs of owning a home? Are you moving closer to work or further away? How far away is the daycare from your home and your job? These are questions that you need to ask yourself when making the decision of buying a...
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