Principles of Economics
file:///E|/toc/Mankiw%20-%20Principles%20of%20Economics%203e%20-%20TOC.txt
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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IN THIS CHAPTER
YOU WILL . . .
Discuss how
incentives affect
people’s behavior
Learn the meaning of
opportunity cost
Learn that
economics is about
the allocation of
scarce resources
Examine some of the
tradeoffs that people
face
See how to use
marginal reasoning
when making
decisions
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 dinner? 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,
TEN PRINCIPLES
OF ECONOMICS
3
Consider why trade
among people or
nations can be good
for everyone
Discuss why markets
are a good, but not
perfect, way to
allocate resources
Learn what
determines some
trends in the overall
economy
4 PART ONE INTRODUCTION
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.
Economics is 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.”
HOW PEOPLE MAKE DECISIONS
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.
PRINCIPLE #1: PEOPLE FACE TRADEOFFS
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.
scarcity
the limited nature of society’s
resources
economics
the study of how society manages its
scarce resources
CHAPTER 1 TEN PRINCIPLES OF ECONOMICS 5
Or consider parents deciding how to spend their family income. They can buy
food, clothing, or a family vacation. Or they can save some of the family income
for retirement or the children’s college education. When they choose to spend an
extra dollar on one of these goods, they have one less dollar to spend on some
other good.
When people are grouped into societies, they face different kinds of tradeoffs.
The classic tradeoff is between “guns and butter.” The more we spend on national
defense to protect our shores from foreign aggressors (guns), the less we can spend
on consumer goods to raise our standard of living at home (butter). Also important
in modern society is the tradeoff between a clean environment and a high level of
income. Laws that require firms to reduce pollution raise the cost of producing
goods and services. Because of the higher costs, these firms end up earning smaller
profits, paying lower wages, charging higher prices, or some combination of these
three. Thus, while pollution regulations give us the benefit of a cleaner environ-
ment and the improved health that comes with it, they have the cost of reducing
the incomes of the firms’ owners, workers, and customers.
Another tradeoff society faces is between efficiency and equity. Efficiency
means that society is getting the most it can from its scarce resources. Equity
means that the benefits of those resources are distributed fairly among society’s
members. In other words, efficiency refers to the size of the economic pie, and
equity refers to how the pie is divided. Often, when government policies are being
designed, these two goals conflict.
Consider, for instance, policies aimed at achieving a more equal distribution of
economic well-being. Some of these policies, such as the welfare system or unem-
ployment insurance, try to help those members of society who are most in need.
Others, such as the individual income tax, ask the financially successful to con-
tribute more than others to support the government. Although these policies have
the benefit of achieving greater equity, they have a cost in terms of reduced effi-
ciency. When the government redistributes income from the rich to the poor, it re-
duces the reward for working hard; as a result, people work less and produce
fewer goods and services. In other words, when the government tries to cut the
economic pie into more equal slices, the pie gets smaller.
Recognizing that people face tradeoffs does not by itself tell us what decisions
they will or should make. A student should not abandon the study of psychology
just because doing so would increase the time available for the study of econom-
ics. Society should not stop protecting the environment just because environmen-
tal regulations reduce our material standard of living. The poor should not be
ignored just because helping them distorts work incentives. Nonetheless, ac-
knowledging life’s tradeoffs is important because people are likely to make good
decisions only if they understand the options that they have available.
PRINCIPLE #2: THE COST OF SOMETHING IS
WHAT YOU GIVE UP TO GET IT
Because people face tradeoffs, making decisions requires comparing the costs and
benefits of alternative courses of action. In many cases, however, the cost of some
action is not as obvious as it might first appear.
Consider, for example, the decision whether to go to college. The benefit is in-
tellectual enrichment and a lifetime of better job opportunities. But what is the
cost? To answer this question, you might be tempted to add up the money you
efficiency
the property of society getting the
most it can from its scarce resources
equity
the property of distributing economic
prosperity fairly among the members
of society
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thông tin tài liệu
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
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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