CHAPTER+1

=The Principles of Economics      =   //Wiki definition: the social science that studies production, distribution, and consumption of goods and services. Economic: ancient greek for oikos (house) and nomos (custom, law)- “rules of the household”//

<span style="font-family: Georgia,serif;">
 * Scarcity**: limited resources
 * Economics**: examining the spending of goods and services in the society

media type="youtube" key="vJZXWMraESw" width="425" height="350" ==<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="color: rgb(250, 0, 78);"><span style="color: rgb(187, 44, 232);"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;">//<span style="color: rgb(255, 15, 135); font-family: Georgia,serif;">Principle 1: People Face Trade-offs //       == <span style="font-family: Georgia,serif;"><span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">**efficiency:** the amount of waste and unnecessities and receiving the most reasonable amount in scarcity
 * Equity**: the fairness in distributing the property in the study of economics. Trade-off decision is made while deciding what to gain and what to give away

The first principle is basically choosing one from any two choices, which may result successful as well as unsuccessful. Say if there are cheetoss and nachos. You need to trade-off, which means you need to choose either cheetos OR nachos. In such decision, you may have to consider and understand what would happen, what would benefit you, and what would harm you. Such ‘trade-off’ other than the cheetos and nachos example, it features efficiency and equity. You can look both terms in a wider view of the world and the countries that are divided. //Efficiency// is the amount of waste and unnecessities and receiving the most reasonable amount in scarcity. //Equity// is the fairness in distributing the property in the study of economics. Trade-off decision is made while deciding what to gain and what to give away.

==<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="color: rgb(249, 16, 107); font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">//Principle 2: The Cost of Something Is What You Give Up to Get It//      == <span style="font-family: Georgia,serif;"><span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">**opportunity cost**: choice between what to gain and what to loose. In order to gain an item, one should give up another item in order to achieve one.

As mentioned on the first principle, analyzing and determining your choice face trade off. The choice that you made can harm you, or it can also bring you benefits. However, this time, instead of ‘or’, ‘and’ would be a right definition. It will harm you AND benefit you. This is called the //opportunity cost,// choice between what to gain and what to loose. In order to gain an item, one should give up another item in order to achieve one. If the government wants to build an apartment town, the opportunity cost is building or creating another best item with the apartment town. Depending on the size of the apartment town, the government has to construct schools. A certain amount of area requires elementary school. If the area becomes larger, middle school is also required and if the area is at the maximum level, government has to build high school as well as middle school and elementary school.

You have received a week holiday from your work. You have many things to finish during that time. If you are willing to have a trip to somewhere else, your opportunity cost is whatever that can be done during the days you are in a trip. It can be cleaning your house, going out to buy new clothes, or finishing your last minute assignment from the work. Opportunity cost does not necessarily require monetary costs

<span style="color: rgb(255, 10, 112); font-family: Georgia,serif;"> ==<span style="color: rgb(255, 10, 112); font-family: Georgia,serif;"><span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">Principle 3: Rational People Think at the Margin       == <span style="font-family: Georgia,serif;"><span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">**rational people**: people thinking in a reasonable way, by applying any rules of one’s own
 * marginal changes**: something extra to the plan of something one is willing to gain.

<span style="font-family: Georgia,serif;">Many people think that they are rational people. Rational people are people thinking in a reasonable way, by applying any rules of one’s own. People do their things to achieve the highest possible level. In doing this, it requires marginal changes. Marginal changes is that something extra to the plan of something one is willing to gain. Marginal cost and marginal benefits are the two factors that is required while making the decision. For example, say that you went to White Castle in Chicago. Since the burger is extremely small, you are not sure if you will pursuit your satisfaction by eating just one burgur. However, if satisfaction is bigger than the price of the burger, the number of white castle burger that you consume wouldn't matter. On the other hand, if the price is more important to you, you will only eat given amount. In addition, when satisfaction is more important, you can think rationally by deciding whether you will eat the second burger or not in order to fullfill your satisfaction. ==<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="color: rgb(254, 16, 163); font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">//<span style="color: rgb(255, 20, 144);">Principle 4: People Respond to Incentives //      == <span style="font-family: Georgia,serif;"><span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;"><span style="font-family: 'Trebuchet MS',Helvetica,sans-serif;">**incentives**: a motivation for choosing one from the alternative. Encouraging something to do.

//Incentive// is a motivation for choosing one from the alternative. Encouraging something to do. A person’s action is incited by the motivation there is to the action. Let’s say that since the price of oranges got extremely high, the price of orange juice became higher. Then, you may want to buy grape juice because orange juice is too expensive. Like this, incentive is very straight forward that even for small changes, markets and customers react right away. media type="youtube" key="PQ9Mvzhcrhs" width="425" height="350"

==<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="color: rgb(254, 1, 110); font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">//Principle 5: Trade can Make Everyone Better Off//      == <span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"> <span style="font-family: Georgia,serif;"><span style="font-family: Georgia,serif;">Trading can make everyone better off, but trading can also make everyone worse off. Trading can only happen between two people or two companies. Trading becomes successful between two successful products in a successful environment. Say that I have Animal Crackers but I want ABC biscuits. Fortunately, you have ABC biscuits but you want Animal Crackers. Here, the trading becomes successful between us two by receiving what we want. However, if Animal Crackers are a dollar more expensive than the price of ABC biscuits, the trading is not considered successful because I would have loss in money.

==<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">      == ==<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">      == ==<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">      == ==<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">      == ==<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">      == ==<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="color: rgb(255, 10, 106); font-family: Georgia,serif;">Principle 6: Markets Are Usually a Good Way to Organize Economic Activity      == <span style="font-family: Georgia,serif;"><span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">**market economy**: decision made based on the standard of supply and demand that firms and households cooperate with goods and services.

<span style="font-family: Georgia,serif;">Market is an important factor in determining the organization of economic actions. It is controlled by you and people next to you, buyers and sellers. The Market economy is a decision made based on the standard of supply and demand that firms and households cooperate with goods and services. The sixth principle has to do with the information on the bottom of this page, Adam Smith’s “The Invisible Hand”. The invisible hand is an important factor in this market economy which neutralizes the desirable outcomes of the market. <span style="color: rgb(255, 26, 120);"> ==<span style="color: rgb(255, 26, 120);"><span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">Principle 7: Governments Can Sometimes Improve Market Outcomes       == <span style="font-family: Georgia,serif;"><span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">**property rights:** basically, human right that let a person to act and control one’s own property (or goods and services)
 * market failure:** position where distributing the goods and services in the market fails to be efficient.
 * externality**: impact on any action when a product is created and inspired for the society’s benefit.
 * market power:** ability of a small group of people to influence the relationship of market price of goods and services.

Not only the effect of the invisible hand improves the economic, government can also improve market outcomes as well. Besides, there needs to be strong government in order for the invisible hand to be successful. In order to maintain successful economy, property rights is required, which is basically, human right that let a person to act and control one’s own property (or goods and services). The significant invisible hand has some weaknesses too. It leads to efficient resources, but the market failure may go on a way, which is a position where distributing the goods and services in the market fails to be efficient. The video below shows the example of a market failure, externality. Externality is one of the reasons for market failure, where it impacts on any action when a product is created and inspired for the society’s benefit. Another reasons for a market failure is market power, an ability of a small group of people that can influence the relationship of market price of goods and services. Although the invisible hand is great, with these reasons of market failure may affect the economic efficiency. media type="youtube" key="bYGxJkUEMW4" width="425" height="350"

==<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="color: rgb(5, 255, 142); font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="color: rgb(255, 0, 134); font-family: Georgia,serif;">//<span style="font-family: Georgia,serif;"><span style="font-family: Georgia,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;"><span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="color: rgb(0, 105, 255); font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">                   The Invisible Hand//       == <span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: Georgia,serif;"> <span style="font-family: Georgia,serif;"><span style="font-family: Georgia,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">Created by Adam Smith, he described in his book //The Wealth of Nations//, a person’s own self-interest usually influences the goods in the community by the ‘invisible hand’. He proposed two ways to work out and interact with other people, which must be done continuously: demanding benefit of others and not proposing one’s self-interest. For example, high wage jobs, in the perspective of a person who give wages, is a sign that they value others to receive the amount they are paying for. ====<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="color: rgb(31, 255, 64);"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;">//<span style="font-family: Georgia,serif;"><span style="font-family: Georgia,serif;"><span style="display: block; color: rgb(92, 99, 255); text-align: center;">“Man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me what I want, and you shall have this which you want, is the meaning of every such offer; and it is the manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love.”  //       ==== <span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="color: rgb(240, 0, 80); font-family: 'Lucida Console',Monaco,monospace;"> =<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="color: rgb(255, 137, 92); font-family: Georgia,serif;">Questions:      = <span style="font-family: Georgia,serif;">*Short Answers* 1. What does,"There is no such thing as a free lunch" mean?

2.Helen decides to watch t.v. instead of going to the movies with her friend. What is her opportunity cost?

3. The seller decides to higher the price of oranges. Yet, he keeps the tangerines at the same price. Will the buyers react to the change of price in oranges?

4. What do rational people care about?

5. Who controls the market economy?

6. The cost of something is always the amount of money you pay to get it. (True or False) 7. When the price of Starbucks rises, rational people decide to go to Coffee Bean. (True or False)
 * answer to chapter 1Qs**

==<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="color: rgb(92, 99, 255);">      == <span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="color: rgb(92, 99, 255);">    <span style="color: rgb(92, 99, 255);">

<span style="font-family: Georgia,serif;"> ===<span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;">//<span style="font-family: Georgia,serif;">Source //     === <span style="font-family: Georgia,serif;"><span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Comic Sans MS',cursive;"><span style="font-family: 'Lucida Console',Monaco,monospace;"><span style="font-family: 'Lucida Sans Unicode','Lucida Grande',sans-serif;"><span style="font-family: Georgia,serif;">http://www.slembeck.ch/principles.html <span style="font-family: Georgia,serif;">http://www.smallparty.org/yoram/humor/mankiw.pdf <span style="font-family: Georgia,serif;">http://pass.maths.org.uk/issue14/features/smith/

<span style="font-family: Georgia,serif;">image http://www.stus.com/images/products/cla253b2.gif http://www.greekshares.com/uploaded/files/adam_smith.jpg