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Chapter 1
- Scarcity: the limited nature of society’s resources
- Economics: the study of how society manages its scarce resources, e.g.
- There are 10 principle of economic which are needed to be remember throughout.
- People face trade-off
- Individual(time,money) and society(efficiency vs equality).
- Individual(time,money) and society(efficiency vs equality).
- Cost of something is what your give up to get it.\
- The opportunity cost of any item is whatever must be given up to obtain it.
- The opportunity cost of any item is whatever must be given up to obtain it.
- Rational people thinking at margin(effect of one additional item)
- This principle assume that everyone is rational people(made their decision base on their interests) this was addressed on Adam Smith's Wealth of Nation.
- This principle assume that everyone is rational people(made their decision base on their interests) this was addressed on Adam Smith's Wealth of Nation.
- People respond to incentives(诱惑物）
- This statement reveals that human psychology is a important feature in economic study.
- This statement reveals that human psychology is a important feature in economic study.
- Trade can make everyone better-off
- Ex: trade of agricultural product and technology between Japan and America, it will break the law of PPF. It involved absolute advantages(low input) and comparative advantage(low opportunity cost win)
- Ex: trade of agricultural product and technology between Japan and America, it will break the law of PPF. It involved absolute advantages(low input) and comparative advantage(low opportunity cost win)
- Markets are usually a good way to organize economy activity.
- Markets can balance the price.
- Markets can balance the price.
- Government can sometime improve market outcome.
- A country's standard of living depends on its ability to produce goods and services.
- Price rise when government print too much money.
- Society Faces a Short-run Tradeoff Between Inflation and Unemployment
Economistsplay two roles:
- Scientists: try to explain the world.
- Policy advisors: try to improve it
Base onthese two roles, they have two types of statement. Normativeand positive. In my opinion, economists as a scientists tend to usepositive statement, because positive statement isbase on fact, and it is testable. Policy advisors use both positive andnormative, because they need to give appropriate advice to improve overallstandard of living. Therefore, they will come out with some normative statement to address their opinion, anduse positive statement to prove their normative statement.
Assumptions: because of the world is complex,there are two much variables, and its unlike to fit it in all one models.Therefore, economists need to make a simplify assumptions where most of thetime only have two coordinates with two variables.
Ex: Countries A and countries B are trading products X and Y.
chapter 3
Absolute advantage:
The ability to produce a good using fewer inputs than anotherproducer
Measures the cost of a good in terms of the inputs required toproduce it
Principle of comparativeadvantage
Each good should be produced by the individual that has the smalleropportunity cost of producing that good
Comparative advantage
The ability to produce a good at a lower opportunity cost thananother producer
Principle of comparativeadvantage
Each good should be produced by the individual that has the smalleropportunity cost of producing that good
note：These idea were all followinga principle that "trade" can make everyone better-off. Therefore, ina case of international trade, two countries are willing to produce productthat has opportunity cost. Off course, in international market, the lessopportuntiy cost, the more completitve of the prodcut or serivce.
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