The Cost Of Something Is What You Give Up To Get Everything

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Register to read the introduction… Principle #2: The Cost of Something Is What You Give Up to Get It * Making decisions requires comparing the costs and benefits of our alternatives * For example, the choice of going to college/university takes great consideration as it has high cost and takes up a lot of time * Opportunity Cost – what we give up to get an …show more content…
Policies aim to either enlarge the economic pie or to change how the pie is divided * Efficiency under the invisible hand can lead to market failure and market power * Market Failure – situation in which a market left on its own fails to allocate resources efficiently usually caused by externality. * Externality – the impact of one person’s actions on the well-being of a bystander (i.e.: pollution) * Market Power – the ability of a single person (or small group) to unduly influence market prices * Invisible hand does not ensure that everyone has sufficient food, decent clothing and adequate health care. Government policies such as income tax and welfare policies however aim to achieve a more equitable distribution of economic well-being

Principle #8: A Country’s Standard of Living Depends on Its Ability to Produce Goods and
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Citizens of high-income countries can afford more luxuries * Variation in the living standards is attributable to differences in countries’ productivity – the quantity of goods and services produced from each hour of a workers time * The larger the productivity, the greater standard of living

Principle #9: Prices Rise When the Government Prints Too Much Money * Inflation – an increase in the overall level of prices in the economy * Because inflation can be an economic problem by imposing various costs on society, keeping it at a low level is a goal of economic policymakers around the world * Inflation is caused by growth in the quantity of money

Principle #10: Society Faces a Short-Run Trade-off between Inflation and Unemployment * Higher level of prices increases the quantity of money * Short-run effects of money include: * Increasing the amount of money in the economy stimulates the overall level of spending and the demand for goods * Higher demand can cause firms to raise their prices, increase the quantity of goods and hire more workers to produce those goods * More hiring means lower

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