Mankiw principles of economics 3rd edition 1 5

Mankiw Principles of Economics HQ ThiNganHang com file ///E|/toc/Mankiw%20 %20Principles%20of%20Economics%203e%20 %20TOC txt Part One Introduction 1 Ten Principles of Economics 2 Thinking Like an Econ[.]

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Part One:

Introduction

1 Ten Principles of Economics

2 Thinking Like an Economist Appendix: Graphing: A Brief Review

3 Interdependence and the Gains from Trade

Part Two: Supply and Demand I: How Markets Work

4 The Market Forces of Supply and Demand

5 Elasticity and Its Application

6 Supply, Demand, and Government Policies

Part Three: Supply and Demand II: Markets and Welfare

7 Consumers, Producers, and the Efficiency of Markets

8 Application: The Costs of Taxation

9 Application: International Trade

Part Four: The Economics of Public Sector

10 Externalities

11 Public Goods and Common Resources

12 The Design of the Tax System

Part Five: Firm Behavior and the Organization of Industry

13 The Costs of Production

14 Firms in Competitive Markets

15 Monopoly

16 Oligopoly

17 Monopolistic Competition

Part Six: The Economics of Labor Markets

18 The Markets for the Factors of Production

19 Earnings and Discrimination

20 Income Inequality and Poverty

Part Seven: Topics for Further Study

21 The Theory of Consumer Choice

Part Eight: The Data of Macroeconomics

22 Measuring a Nation''s Income

23 Measuring the Cost of Living

Part Nine: The Real Economy in the Long Run

24 Production and Growth

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25 Saving, Investment, and the Financial System

26 Unemployment and Its Natural Rate

Part Ten: Money and Prices in the Long Run

27 The Monetary System

28 Money Growth and Inflation

Part Eleven: The Macroeconomics of Open Economies

29 Open-Economy Macroeconomics: Basic Concepts

30 A Macroeconomic Theory of the Open Economy

Part Twelve: Short-Run Economic Fluctuations

31 Aggregate Demand and Aggregate Supply

32 The Influence of Monetary and Fiscal Policy on Aggregate Demand

33 The Short-Run Tradeoff between Inflation and Unemployment

Part Thirteen: Final Thoughts

34 Five Debates over Macroeconomic Policy

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I N T H I S C H A P T E R

Y O U W I L L

D i s c u s s h o w

i n c e n t i v e s a f f e c t

p e o p l e ’ s b e h a v i o r

L e a r n t h e m e a n i n g o f

o p p o r t u n i t y c o s t

L e a r n t h a t

e c o n o m i c s i s a b o u t

t h e a l l o c a t i o n o f

s c a r c e r e s o u r c e s

E x a m i n e s o m e o f t h e

t r a d e o f f s t h a t p e o p l e

f a c e

S e e h o w t o u s e

m a r g i n a l r e a s o n i n g

w h e n m a k i n g

d e c i s i o n s

The word economy comes from the Greek word for “one who manages a

house-hold.” At first, this origin might seem peculiar But, in fact, households and

economies have much in common

A household faces many decisions It must decide which members of the

household do which tasks and what each member gets in return: Who cooks

din-ner? Who does the laundry? Who gets the extra dessert at dindin-ner? Who gets to

choose what TV show to watch? In short, the household must allocate its scarce

re-sources among its various members, taking into account each member’s abilities,

efforts, and desires

Like a household, a society faces many decisions A society must decide what

jobs will be done and who will do them It needs some people to grow food, other

people to make clothing, and still others to design computer software Once

soci-ety has allocated people (as well as land, buildings, and machines) to various jobs,

T E N P R I N C I P L E S

3

C o n s i d e r w h y t r a d e

a m o n g p e o p l e o r

n a t i o n s c a n b e g o o d

f o r e v e r y o n e

D i s c u s s w h y m a r k e t s

a r e a g o o d , b u t n o t

p e r f e c t , w a y t o

a l l o c a t e r e s o u r c e s

L e a r n w h a t

d e t e r m i n e s s o m e

t r e n d s i n t h e o v e r a l l

e c o n o m y

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it must also allocate the output of goods and services that they produce It must decide who will eat caviar and who will eat potatoes It must decide who will drive a Porsche and who will take the bus

The management of society’s resources is important because resources are

scarce Scarcity means that society has limited resources and therefore cannot

pro-duce all the goods and services people wish to have Just as a household cannot give every member everything he or she wants, a society cannot give every indi-vidual the highest standard of living to which he or she might aspire

Economicsis the study of how society manages its scarce resources In most societies, resources are allocated not by a single central planner but through the combined actions of millions of households and firms Economists therefore study how people make decisions: how much they work, what they buy, how much they save, and how they invest their savings Economists also study how people inter-act with one another For instance, they examine how the multitude of buyers and sellers of a good together determine the price at which the good is sold and the quantity that is sold Finally, economists analyze forces and trends that affect the economy as a whole, including the growth in average income, the fraction of the population that cannot find work, and the rate at which prices are rising Although the study of economics has many facets, the field is unified by

sev-eral central ideas In the rest of this chapter, we look at Ten Principles of Economics.

These principles recur throughout this book and are introduced here to give you

an overview of what economics is all about You can think of this chapter as a “pre-view of coming attractions.”

H O W P E O P L E M A K E D E C I S I O N S

There is no mystery to what an “economy” is Whether we are talking about the economy of Los Angeles, of the United States, or of the whole world, an economy

is just a group of people interacting with one another as they go about their lives Because the behavior of an economy reflects the behavior of the individuals who make up the economy, we start our study of economics with four principles of in-dividual decisionmaking

P R I N C I P L E # 1 : P E O P L E FA C E T R A D E O F F S

The first lesson about making decisions is summarized in the adage: “There is no such thing as a free lunch.” To get one thing that we like, we usually have to give

up another thing that we like Making decisions requires trading off one goal against another

Consider a student who must decide how to allocate her most valuable re-source—her time She can spend all of her time studying economics; she can spend all of her time studying psychology; or she can divide her time between the two fields For every hour she studies one subject, she gives up an hour she could have used studying the other And for every hour she spends studying, she gives up an hour that she could have spent napping, bike riding, watching TV, or working at her part-time job for some extra spending money

s c a r c i t y

the limited nature of society’s

resources

e c o n o m i c s

the study of how society manages its

scarce resources

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