Chapter+1+(+Seven+Principles+of+Economics)

= ¿Que Es economía ? = = Q'est ce que c'est l 'économie ? = = What is economics ? =

Do we have enough resources for everybody in the world?
===Resources can be in the scientific way, but at the same time it can mean anything that we want, or need. The only problem is that there may //not be enough// resources in our society for all of us. This 'lack' is called a scarcity!===



Economy was part of everybody's lives since they were born. Because behavior of economy reflects the behavior of the people, we have to start off by studying the principles of people's decision making.

==== To buy a thing that you want, you would need to give up your money to by that 'good.' But if you buy that good with your money, you can not spend that money on something else. ====

Another trade-offs that people deal with is between efficiency and equity.
====**Efficiency** is when the society/ community/ group gets the most benefit out of what they have- 'scarce resources '-'goods ' and equity means that these scarce resources are divided and given <span style="color: rgb(91, 216, 19);">equally, fairly amoung the people of that system.====

<span style="font-family: 'Arial Black',Gadget,sans-serif;">Principle 2: The cost of Something is what you give up to get it.


====Making decisions involve in <span style="color: rgb(13, 202, 227);">comparing goods by looking at how much they <span style="font-size: 110%; color: rgb(108, 29, 231);">cost, and the <span style="font-size: 110%; color: rgb(10, 78, 189);">benefits of the certain good.====

<span style="font-family: 'Comic Sans MS',cursive;">
<span style="font-family: 'Comic Sans MS',cursive;"> I don't have a car, and I need one to drive through the country. Also if I have a car I get to travel here and there. The gas price went up, so I am not to sure it is a good idea to buy a car. But then, I heard that in couple of years, porsche is going to raise their price.

I go to France for my vacation every holidays, and I need a place to stay because I always stay at a hotel. May be it is cheaper in the long run to buy a house, and while I am not there I can lend it on someone else. I will be able to make some money too.

Opportunity cost is whatever you must give up to win the other good.
<span style="font-family: 'Comic Sans MS',cursive;">

<span style="font-family: 'Comic Sans MS',cursive;">If I choose to buy the porsche, my opportunity cost would be the house.
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[[image:thinking_man.jpg align="center" link="http://www-scf.usc.edu/%7Essig/Images/thinking_man.jpg"]]
====Rational people are the <span style="color: rgb(232, 38, 119);">basis of economy. Rational people <span style="color: rgb(19, 216, 123);">systematically and purposefully do their best to win whatever it is that they want.====

Example -
====<span style="font-family: 'Comic Sans MS',cursive;">"I want a house and I am low around hundred bucks, I am going to work for another few days to earn that and buy a house! I was going to go on a vacation, but I guess that can wait for another few days." ====

<span style="font-size: 120%; font-family: 'Arial Black',Gadget,sans-serif;">Principle 4: People Respond to Incentives
===<span style="font-size: 120%; font-family: 'Arial Black',Gadget,sans-serif;">  ===

====<span style="font-family: 'Comic Sans MS',cursive;">If I can only make penut butter ice cream, and Aless can only make strawberry cheesecake ice cream, then by trading, Aless and I can taste both types of ice cream. ==== ====<span style="font-family: 'Comic Sans MS',cursive;"> If Juliana decides to buy the porshe, and I decide to buy the house in France with jacuzzi, then we may want to trade to provide each other's lacks ====

<span style="font-size: 120%; font-family: 'Arial Black',Gadget,sans-serif;">Principle 6: Markets are usually a good way to organize Economic Activity


====Market economy is contolled mostly by the demanders and sellers, Firms decide who to hire, and what to make, whereas the households decide which firms to work in and what to buy with their incomes. <span style="color: rgb(149, 224, 46);">None of us are just firms, or just households. Each one of us can be the firms, or the housholds - the demaders, and the suppliers. Adam Smith made a famous theory based on the observation of market economy that there is an "invisible hand" that influences that market. The "invisible hand" will bring back up, or back down the price to equilibrium price/quantity.====


 * ====If the money price of all goods and services increase...====
 * ====There will be an increase of price in companies, firms...====
 * ====Because it is all very expensive, the companies will have to more goods====
 * ====And that would be that they will increase the production, which will result in hiring more workers====
 * ====More hiring means lower unemployment!====

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So what are the answers? They are actually both false.

<span style="color: rgb(0, 0, 0);"><span style="color: rgb(55, 243, 18);">[Vocab Note]
Buisness cycle: fluctuations in economic activity

Questions:

Which of the following is **not** one of the characteristics of a market economy that helps produce spontaneous self-organization? Answer: E
 * || a) || Individuals pursue their own self-interest, buying and selling what seems best for themselves and their families. ||
 * || b) || People respond to financial incentives. ||
 * || c) || Prices are set in open markets in which suppliers compete to sell to potential buyers. ||
 * || d) || Economic transactions are governed by a legal structure, which enforces contracts and property rights, and is largely created and administered by the government. ||
 * || e) || Firms are guided by the central government in deciding what to produce. ||

Government policies designed to promote efficiency:

a. tend to cause the economy to grow more slowly. b. usually do so at the expense of equity. c. always fail. d. require very high taxes.

Answer: B 'Economics is everything about money.' Comment on this statement.

Answer: "The nature and scope of economics extends well beyond money, embracing a range of resource allocation problems that confront individuals, households, and governments."

Sources: Are all stated above, once you click on each item. Textbook: Principles of Microeconomics by N. Gregory Mankiw http://websites.swlearning.com/cgi-wadsworth/course_products_wp.pl?fid=M20b&product_isbn_issn=9780324319163&discipline_number=413 http://www.oup.com/uk/orc/bin/9780199286416/01student/questions/lipsey_student_ch01/page_01.htm