T E A M P H I L I P P I N E Scabacub | espina | goyena | morales | tapan | yodico

10E C O N O M I C P R I N C I P L E SO F G R E G O R Y M A N K I W

Principle #1: People face trade offs

Principle #2 The cost of something is what you give up to get it.

I have a small sari-sari store and I only have a capital of 100Php for candies. One pack of Potchi costs 50Php. One pack of Lollipop costs 50Php also. I can only buy the products based on the schedule table below.

Potchi LollipopLollipop Potchi

2 0

1 1

0 2

PRINCIPLE #3: RATIONAL PEOPLE THINK AT THE MARGIN

Principle #4: People respond to incentives

Principle #5 Trade can make everyone better off.

Thank you for your traded abaca fibers. I

can now finish manufacturing my

abaca bags.

No worries! Thank you also for your

traded cotton threads. My cloth

production increased.

PRINCIPLE

6Markets are usually a good way to organize economic activity

FIRMS HOUSEHOLDS

WHO to hire

WHAT to produce

WHO to work forHOW to spend

INTERACTION

MARKET ECONOMYAllocates resources

through the decentralized

decisions of many household and firms as they interact in

markets

PRINCIPLE 6 Markets are usually a good way to organize economic

activity Farm Markets Supermarkets Bakeshop/

Consu-mers

INTERACTION(Buying and Selling)

MARKET ECONOMY

Allocates resources through the

decentralized decisions of many

household and firms as they interact in

markets

MARKET POWER+

MARKET FAILURE

ADJUSTING TAXESCONTROLLING PRICE HIKES

ESTABLISHING POLICIES

Principle #8: A Country's Standard of Living Depends on Its Ability to Produce Goods and Services

Auld, C. (2011). The Global Liveability Survey’s less than compelling methods, and an alternative. From The Global Liveability Survey’s less than compelling methods, and an

alternative2011/08/31/the-global-liveability-surveys-less-than-compelling-methods-and-an-alternative/

Principle # 9

PRINCIPLE 10Society Faces a Short-Run Tradeoff between Inflation and Unemployment

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