Solution Manual For Principles of Microeconomics, 9th Edition Joshua Gans Stephen King Martin Byford Gregory Mankiw Chapter 1-22
Chapter 1 Ten lessons from economics Learning objectives After reading this chapter, students should be able to: recognise that people face trade-offs when they make decisions, and discuss how the nature of these trade-offs influences their behaviour explain why trade among people or nations can be good for everyone, and discuss why markets are a good, but not perfect, way to allocate resources identify the factors that drive some significant trends in the overall economy.
Key points
The fundamental lessons about individual decision making are that people face trade-offs among alternative goals, that the cost of any action is measured in terms of forgone opportunities, that rational people make decisions by comparing marginal costs and marginal benefits, and that people change their behaviour in response to the incentives they face. The fundamental lessons about interactions among people are that trade can be mutually beneficial, that markets are usually a good way of coordinating trade among people and that the government can potentially improve market outcomes if there is some market failure or if the market outcome is inequitable. The fundamental lessons about the economy as a whole are that productivity is the ultimate source of living standards, that money growth is the ultimate source of inflation and that society faces a shortrun trade-off between inflation and unemployment.
Chapter outline Introduction Begin by pointing out that economics is a subject that students must confront in their everyday lives. Point out that they already spend a great deal of their time thinking about economic issues: prices, buying decisions, use of their time, etc.
The word ‘economy’ comes from the Greek word oikonomos, meaning ‘one who manages a household’. This makes some sense, since in the economy we are faced with many decisions (just as a household is). The fundamental economic problem: resources are scarce. You will want to start the semester by explaining to students that economics is by and large a subject of logic; however, part of learning economics is understanding a new vocabulary. In order to have a productive discourse, economists generally use very precise (and sometimes different) definitions for words that are commonly used outside of the economics discipline. The use of such precise language is common to other disciplines. Therefore, it will be helpful to students if you follow the definitions provided in the text as much as possible. Copyright 2023 Cengage Learning Australia Pty Limited 1