10 Principles of Economics Essay
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 …show more content…
Principal 2: The cost of something is what you give up to get it.
Is the trade-off you just made worth it? Will you make it to class on time if you stay up late? Will you pass your class if the assignment is late? Right here, you are comparing the cost of sleep versus homework. Although this does not have much financial value, it does have opportunity cost.
Principal 3: Rational people think at the margin.
This essentially means that you need to think things through completely. What would change if you went to sleep now, but woke up early to finish the assignment? The difference would be marginal, or small, but a rational person would think marginally to maximize the benefits of their decision.
Principal 4: People respond to incentives.
If your instructor offered five extra points to assignments turned in early, would you be up late doing your homework? Most likely, you would respond to the incentive, and not be in the predicament you are in now. Incentives can mean both reward and punishment, so staying up late to finish your homework is responding to the incentive as well. You are avoiding punishment, or a bad grade for a late assignment.
The Ten Principles of Economics Part 2: The Three Principals Concerning People's Economic Interactions
The first four basic