I.D. # 6
Classroom days: MTWR
Classroom hours: 8:00a – 10:05a
Chapter 1: Ten principles of economics

1. Give three examples of important trade-offs that you face in your life. a. ‘Guns and Butter’ meaning people spend more money and taxes on weapons, guns, to keep safe than they would to spend money on consumers goods to feed their family and keep them healthy. b. ‘Efficiency and Equality’ people are worried about getting the most benefits from resources and having the most of things rather than being able to split a good amount to everyone. c. ‘there aren’t no such thing as a free lunch’ meaning, when you are doing something to be good at something but also trying to balance another deed, you will always be cutting time, or money from opportunity. Nothing will be balanced 2. What is the opportunity cost of seeing a movie? d. The opportunity cost of seeing a movie is the foregone value of a similar activity. Going to spend money on a movie when you can spend money going rock climbing and having the same amount of enjoyment. 3. Water is necessary for life. Is the marginal benefit of a glass of water large or small? e. The marginal benefit of anything is only measurable relative to the consumer. A glass of water has little marginal value to me. I have a ready supply of water, and lack of it doesn't affect my health. f. The marginal value of a glass of clean water is, to many people, very high, because they have little. 4. Why should policymakers think about incentives? g. Policymakers must think about incentives in order to encourage people to participate in their programs and support their bills, as people are likely to support measures that help them. 5. Why isn’t trade among countries like a game with some winners and some losers? h. Trade is serious, it's about reaching a win-win situation, it is not like a game or something. Maybe there will be some countries get more benefits but both will get better off than they don't trade at all. 6. What does the “invisible hand” of the marketplace do? i. in a free market, an individual pursuing his own self-interest tends to also promote the good of his community as a whole maximizing revenue for himself maximizes the total revenue of society as a whole, as this is identical with the sum total of individual revenues. 7. Explain the two main causes of market failure and give an example of each. j. Market failure is a situation in which the market on its own fails to produce an efficient allocation of resources. One major cause of market failure is market power, which is the ability of a since economic supplier to have a substantial influence on market prices. This makes it hard or even impossible for other suppliers to enter the market. An example of this would be a monopoly. k. Another main cause of market failure is an externality, which is the impact of one person’s actions on the well-being of a bystander. An example of this would be a pharmaceutical company dumping toxic wastes into a nearby river. 8. Why is productivity important? l. Productivity is important because it allows the business to be more cost effective. The more output a business has for a specific cause, the cheaper it is to produce the product. This in turn allows the business to have a higher profit. 9. What is inflation and what causes it? m. Inflation means too much of money chasing too few goods. So poverty will be adversely in the country. Bribery will start exploiting the economy. Demand for goods would be more. 10. How are inflation and unemployment related in the short run? n. In the short run, there is a negative correlation between the changes in wages and the rate of unemployment. Changes in wages imply changes of inflation because of expectations.