Aug 12, 2011

10 Principles of Economics

Understanding 10 principles is the key to understanding the whole concept of the economy.

How we make decisions that we make compromises that we have chosen something more something else, or we must give up something else I have. Decisions include how to buy a child a compromise between the money for themselves, money and the child's needs, but also includes trade from the moment you give up your personal information or leisure time for the baby. Shown in giving the film is a very good example of compromise. It shows a college student, to move to Washington if he wants the college has ended, and are part of the time it uses to search for tests or examinations of study for an hour for jobs Washington. The decision on its priorities over others, he faces a compromise. Society as a whole is also disadvantages: The government must decide how to spend a lot of money in some aspects of the country. Something that I personally was happy and made me think when the movie shows how we still have to compromise in the environment: "We all want clean air, but the tradeoff is the loss of income or even the loss of jobs for some Americans "means, says the presenter. I did not understand the relationship between these two until they speak for a coal company in Ohio that had to be closed because he also harmful to the environment, the consequences? Over a thousand people lost their jobs, the Council decided to have a cleaner environment, but the compromise was the loss of jobs of all employees .

Opportunity cost
What do you sacrifice to get something in its economy. The presenter and Gregory Mankiw explains this principle with a college student. To change the election four years of college gives students the costs are many. It is the cost of money in their books and tuition, and also the "opportunity cost", as Mr Mankiw, because they decided to go to college, that 'they provide is the ability to obtain employment and wages are the work would have taken. "Nothing is free, our time is worth something," said Todd Buchholz, an economist, you see that it is a charge of something no longer involved with the money, makes the cost of something, what you can do as much time with your loved ones. This segment of the film contrasts in situations where varying opportunity costs, is shown an example of how the opportunity cost of a student is quite low because that the student abandons low-paid jobs, but the opportunity cost of a very talented high school athletes offered to go directly to Professional is very high, because if they go to college, he gave millions of dollars that he won a professional athlete who decides.

Marginal Thinking
A reasonable person as a student in the film shows, think on, because if too much work to finish college instead of the job that earns money for personal expenses, they simply cut back a bit to work. It is not radical, she is finishing the adjustment, rather, they thought at the edge. Another good example is that of a Broadway that is often met with empty seats. So think on the edge, they decide to negotiate with the public and sell tickets at half price a few hours before the show, the empty spaces in the show. Adjustment of the ticket price the theater actually receives more sales, because even if they deserve 50% of original cost, which is greater than zero, if the seats would have remained empty. By rational thinking and better decisions on the board and make decisions.

If the costs and benefits of something different or to change to change our decisions. "When my son, I want to wash my car if my car says you can use it in the evening today is an incentive," said Robert Sobel of Hofstra University and is for me the best explanation of the steps incentives. The incentive is what they say to use the car that night, in other words, it benefits from, yes, but if they do not have all the incentives, it would probably to doubt it. A very good example they set, how we respond to incentives, and refers to the situation today is that how we as a reaction to gas prices. In Europe, the price of gasoline is very high, this incentive makes people buy smaller, more fuel-efficient cars, unlike America, where the price is still relatively low, and people buy big cars and vans. Did you not notice that the shops and streets were the "Tax Free Week" here in Florida packed? This is because people incentives, incentives that will benefit react, apparently you buy more, if you will not be taxed. When President Clinton was in office, he asked the price of cigarettes in the amount of one dollar and a half because it was shown that young people not to smoke and buy cigarettes. This is a perfect example of an obstacle, because it discourages young people from smoking. Another point that explains the behavior of some people taking incentives. Seat belts are now required, as it is effective in saving lives, but instead: "There is evidence that behavior change in response to that seat belts do," says Gregory, because some people exceed the speed limit because they feel safer.

Since we are not self-sufficient we operate. "People are specialized, people do certain tasks and relying on other people, doing other tasks for them," said Gregory. For example, a hairdresser cut their business services (eg haircuts) for money, and the other person relies on her hairdresser let their hair. "The idea I have something and you have something, and if we change we're both going to be better off is basically what makes the economy," says Caroline Hoxby. We as human beings and be able to survive, we act, we change, we rely on. This is explained in more detail in another example in the film. We leave in a group of dedicated farmers who grow food for us, we both benefit, because we get food, and they are paid for the production of food. Countries to trade between them, if they are good products, cheaper to sell. We work every day to survive.

Agreements are made on the markets, and prices are installed, which then communicates with the world. In the food market, farmers sell their products and supermarket owners buy and sell. Another type of market is the stamp market. Mark Easter is a stamp dealer explained that as the stock market, where dealers go for the highest price offered. The first person who works as a market, Adam Smith was the grandfather of the economy, says the first book published on the economy called "The Wealth of Nations" in 1776. How can buyers and sellers interact with each other and not create chaos? Adam Smith said, "the markets, as guided by an invisible hand at least a desirable allocation of resources." We all have interests, and if we try everything to achieve this goal, we would all be happy. The invisible hand in the film is a simple example of Mr. Sobel said he said, "If I have a $ 25 dollar and you have a good and you I want to sell it, we need to win both, they wanted the $ 25 dollars more than good, and I am the good of more than $ 25 dollars you want. "The key to the invisible hand are the prices sellers and consumers depend on them. When communism fell in Russia and Eastern Europe, he showed that the free market is the best way to operate, because people know what they want, how you want, how they want the purchase, and etc.

Sometimes the government is committed to developing better results. This occurs when one of two situations occurs. Only when the market outcome is inefficient, and second, if it fails to efficiently distribute income. In many cases, the externality is the cause of the error. "Externalize is when a business or something individual that creates an impact beyond the immediate buyer and seller of the product. Power plants are obviously for the benefit of users and buyers of electricity, but it also has an externality since the smoke they produce damage to the health of a person can. market power can also lead to market failure because a particular company or in-person to control oversize and affect prices. If the market is not fair to the government as well. Some people have their services paid more than the others, is something that can not be controlled by the invisible hand. If the government gets involved, because the situation is very complicated, more complicated, it is, the harder it is for the government to address them.
Statistics show that in 1998 the average American with an annual income of $ 31 500, which had an average of $ 8,300 Mexican and $ 1700 for the average Indian. You may find that their quality of life is not the same as the Americans are better off than the Indians. Productivity explains everything, a rich country produces more poor. And productivity depends on the skills, capital and etc. If a country has an educated workforce, productivity increases. Economic freedom and independence means more productivity. A perfect example is the United States and Hong Kong, where people are free to use their brains to goods, services or ideas that can be taken to the market where consumers benefit from them.

This essentially means that inflation, which means that prices are rising all the money that is pressure levels. Printing money is something that must be controlled, because even if it can be "temporarily make people feel richer," as stated by Todd Buchholz increase, possibly based on prices and inflation will come into play, and it is very hard to regain control. Stability between goods and money is the best way to keep inflation at bay.

The Phillips curve
The chairman of the Federal Reserve is to maintain low unemployment and inflation under control. Mr. Mankiw notes that you can not achieve both goals simultaneously and that the policy instrument is the money supply. When one rises the other falls and vice versa, it is called the Phillips curve. As the film explains that it is a compromise in the short term, you must decide on the other. But the compromise does not really exist today, because last year, both inflation and unemployment fell. This does not mean that the Phillips curve would not return in the game, say some economists.

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