Lecture 1 - 10 Principles of Economics:

Question 1

Explain o society manages scarce resources

Answer 1

Question 2

What is meant by Scarcity?

Answer 2

Limited Nature of society’s resources

Question 3

What is Economics?

Answer 3

The study of how Society Manages its scarce resources.

Question 4

What do people face most when making decisions?

Give Examples?

Answer 4

Treade Offs.

Example:

Havinf more money to spend on consumables requires working lnger hours which in turn makes us have less time.

Question 5

What important trade off does society face sometimes?

Answer 5

Efficiency vs equality:

Question 6

Why is economics such a difficult topic?

Answer 6

Because it involves measuring trqde offs, “on the one hand , on the other hadn” It is never simply balck and white and it requires extensive statistical and econometrical modeling to understanad it

Question 7

What does economic decision making require?

Answer 7

Comparing the Costs and Benefits of picking option A over option B

Question 8

What is meant by oportunity cost?

Answer 8

Oportunity cost is of any item is what must be given up to obtain it .. it is the cost of not chosing something else

Question 9

Give Examples of Oportunity Cost:

Answer 9

Question 10

Who is Milton Friedman, and what did he proclaim?

Answer 10

https://www.youtube.com/watch?v=r6hgEkdSlJw

A) Famous Economist,

B) He said nothing is free, and the spending of people depends greatly on whether it is fo them or for someone else

Question 11

What is meant by rational people?

Answer 11

Rationale People systematically and purposefully do the best they can to ahcieve the following objectives:

For a customer: maximize their utility based on their preference

For a firm: to mazimize shareholder profits or shareholder value

Question 12

What does the principle of marginal utility state for decisionmakeing?

Answer 12

Decisions are made by weighing the trade offs between the cost and benefits of marginal changes and incremental adjustments to an existing plan

Question 13

What are examples of marginal rational thinking?

Answer 13

Question 14

What are incentives?

Answer 14

Something that induces a person to act. i.e the prospect of a reward or punisment

Question 15

Name a few examples of incentives that rationale people respond to:

Answer 15

Question 16

What does the financial times article about education convey about the concept of trade offs?

Answer 16

Trade offs in the eductioan industry are seen in the fact taht young poeple need to weigh the benefits of receiving a college eduations vs not doing one. More people are going to universities and more jobs than ever require university education.

Question 17

What was mentioned in the college article?

Answer 17

That the cost of attending college has steadily increased and the gap between college and non college educated individuals has weidened. only remedy is seen in online education which is much cheaper

Question 18

What else was mentioned in the College article?

Answer 18

The marginal benefit of going to college has incerased, for people who can afford to attend it.

Low interest rates have made financing college through loans more attractive.

Question 19

Explain the concept of Behavioral Explanations and respnfding to incentives unsing the banking crisys.

Answer 19

banks were overly optimistic, ignored risks etc.

Question 20

What is meant by Pervasive Bank incentives?

Answer 20

If a bank wins, it gets the profits, but when it loses, it socializes the loss as the taxpayers need to recuperate the losses.

Question 21

Answetr this interactive case:

What should U do?

Answer 21

Question 22

What is most commonly linked to trade?

Answer 22

The fact that trade has the potential to improve everyones life

Question 23

Is it better to be self sufficinet or specialized?

Answer 23

In economics it is best to specialize and trade this specialization of services or goods.

Question 24

How do countries benefot from trade and specialization?

Answer 24

They can get

a) better prices for products abroad
b) buy other goods more cheaply abroad
c) have access to new markets

Question 25

What is meant by absolute advantage?

Answer 25

The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost at which any other entity produces that good or service. Entities with absolute advantages can produce a product or service using a smaller number of inputs and/or using a more efficient process than another party producing the same product or service.

Question 26

What is meant by comparative advantage?

Answer 26

## Footnote The ability of a firm or individual to produce goods and/or services at a lower opportunity cost than other firms or individuals. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.

Question 27

What are Markets?

Answer 27

A group of Buyers and Sellers , not necessarily in a single location

Question 28

What is meant by organizing economic activity?

Answer 28

Answering the following questions: 1. What goods to produce 2. How to produce them 3. How much of them to produce 4. Who gets them The answers to these vary over time

Question 29

What internal economics decisions are adressed by a frim?

Answer 29

Decisions such as, which supplier to choose, whether to produce internally etc. consideration is given to hold up costs and negotiation costs

Question 30

What is the main job of a market economy?

Answer 30

A market economy allocates resources through the decentralized decisions of many households and firms as they interact in markets

Question 31

What was the famous takeaway proclaimed by Adam Smith in "The Wealth of Nations?"

Answer 31

Each of the households and firms in a market economy act as if " led by an invisible hand " to promote general economic well being

Question 32

How does the invisible hand of the market function?

Answer 32

Question 33

How can the government improve market outcomes?

Answer 33

By enforcing property rights, i.e. people are less likely to work if they are at risk of their property being stolen.

Question 34

Industrial Nationalism article, what is it about?

Answer 34

It is about Argentian havinf vast amounts of shale gas, but international companies are too scared to enter the market due to the nationalization efforts taken by the government against MNCs who previously operated in that region

Question 35

What is market failure?