A College professor came up with this acronym for remembering the basics of Economics. Pick a letter and expand on it based on what you have learned about Economics so far.
Ten Key Principles in Economics
Everything has a cost. There is no free lunch. There is always a trade-off.
Cost is what you give up to get something. In particular, opportunity cost is cost of the tradeoff.
One More. Rational people make decisions on the basis of the cost of one more unit (of consumption, of investment, of labor hour, etc.).
iNcentives work. People respond to incentives.
Open for trade. Trade can make all parties better off.
Markets Rock! Usually, markets are the best way to allocate scarce resources between producers and consumers.
Intervention in free markets is sometimes needed. (But watch out for the law of unintended effects!)
Concentrate on productivity. A country’s standard of living depends on how productive its economy is.
Sloshing in money leads to higher prices. Inflation is caused by excessive money supply.
!! Caution: In the short run, falling prices may lead to unemployment, and rising employment may lead to inflation.
This Blog is designed for Mr. Pye's AP Economics classes. It is meant to show that Economics is not just a vocabulary word in some textbook, rather it plays a vital role in every aspect of our daily lives.
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44 comments:
"Everything has a cost. There is no free lunch. There is always a trade-off."
Essentially, whenever you are getting something "for free" you are always giving up something else in return. For example, when getting a free Chik-Fil-A sandwich, you are choosing the tasty little piece of meat over the free samples at the mall and over other cheaper meals that may even taste better. So, whether it is higher or lower than what you are getting, there is always an opportunity cost. One just has to way the marginal costs and benefits before making a decision.
-Nabeel Khandwala
C- "Cost is what you give up to get something. In particular, opportunity cost is the cost of the tradeoff."
Ok, say for instance you have an electronics supply company. Well, you have to pay (the cost) for raw materials in order to make the electronics. Also, in order for you to have a larger output of products, you need workers. The cost of having workers is giving them a salary or wage.
A person who sells stock for, let's say, $5,000 is denying the opportunity of selling their stocks at a higher price in the future. That is an example of opportunity cost. Another would be a person that has $20, they can either buy a book or movie. If he/she decides to get the book, the opportunity cost would be the movie.
"One More. Rational people make decisions on the basis of the cost of one more unit (of consumption, of investment, of labor hour, etc.)."
In economics this is marginal analysis. Marginal cost, for example, is the cost of how much it will cost to make one more of something, or buy one more of something. Things will be made or bought if marginal benefits outweigh marginal costs. Even if costs are low, marginal benefit does not always outweigh the cost. Chik-Fil-A sandwiches aren't so appealing after the first ten.
INtervention- the ivisible hand which is all knowning and all powetrful needs a strong hand to keep it in control. This is the case in order to not let the advantage of one company in a bussiness market from verwhelming the market. If there is an even playing field in which capital can be pooled in oreder to create bussiness then no intervention is needed, but if one enity becomes too powerful there is no naturual check so this is where the goverment must take affect.
Everything has a cost. There is no free lunch. There is always a trade-off.
Whenever someone is offering free food, such as brick burger or bullrito. The consumer gets the free food, but it costs the company brick burger or bullrito money. They have to pay for the resources and labor that is involved in making the "free lunch." There will always be an opportunity cost.
"Intervention in free markets is sometimes needed. (But watch out for the law of unintended effects!)"
Sometimes the government needs to intervene to keep a corporation from forming a monopoly in a certain industry. With monopolies, the corporation controls prices instead of the natural laws of supply and demand.
Tariffs and taxes are a few government tools used to "help" native producers. In the end they hurt consumers by raising the price of goods.
Wage and price controls also are supposed to help consumers/producers. But these just create surpluses and shortages, or make a company unable to hire as many people.
Open for trade. Trade can make all parties better off.
Sharing is caring! Just like Barny says, exchanging goods is goof for both parties involved. For example if Tommy has a new toy and Suzy has a new toy but they both get bored, then they can TRADE their toys and they both have new toys to play with!
On a more mature level, different countries are capable of producing different goods, therefor by exchanging the goods that each individual countries are most apt to produce, all countries involved are able to get the products they want, regardless of their ability to produce them.
Open for trade. Trade can make all parties better off.
All countries benefit the world market somehow by exporting and importing products. A country needs to specialize in what product will give them the best comparative advantage, meaning that the good can be produced at a lower domestic opportunity cost than another trading partner. By trading, countries can help their people with resources they don't have. By exporing, a country receives profits that aid them.
Everything has a cost. There is no free lunch. There is always a trade-off.
Everything has a cost, while it may be free of cost to the consumer, somewhere the good are being payed for. For instance the free food coupons we keep getting, the restaurant is looking at the opportunity cost, while they are losing money now, all the introduced customers will bring in money in the future, leading to a positive outcome
S- I have learned that even though some countries may seem like their economy is completely stable because they are involved in international trade, they may not have all their ducks in a row. China, for example, is one of the U.S. biggest traders, but because they continue to sell to the U.S. for such cheap prices, they have raised their inflation through the roof. The people of China are the ones who suffer the consequences of this inflation with all of the high prices for goods.
"Open for trade. Trade can make all parties better off."
Despite the fact the Niger can not produce bicycles as cheaply as China, both China and Niger would benefit the trade of Bicycles between them and China. The fact is, China might be able to produce something more efficiently than it can produce bicycles and it would be smarter to just buy them from Niger. Everybody wins.
"Everything has a cost. There is no free lunch. There is always a trade-off."
Even if something does not cost you any money, it is costing somebody somewhere something. For instance, the free bullritos given out a few weeks ago may not have taken anything out of your pocket, but the price of transportation to get the ingredients to the restaurant plus the price of labor and cooking tools to make the bullritos did not just disappear. The restaurant still had to spend money to feed you. Also, if you are choosing to eat the free bullrito, you are giving up the much more delicious Chipotle (unless you are really hungry and go for both). A trade off always exists.
iNcentives work. People respond to incentives.
A construction worker does not spend his whole day out in the hot sun just because he loves construction an incentive such as MONEY enables him to stay out their and do the job. IF an employer does not pay his employee , then the employee will stop working. The more a worker gets paid the more efficient the worker will be when doing his job.
Open for trade. Trade can make all parties better off.
Trading is essential for countries to function and get the people what they want. Every country has their specialty and is able to produce something easier than other things; therefore, trading allows every country to specialize in one area and make it the best possible, then share with the world. However, everyone benefits from trading because they don't just give it away, they get somethine in return. Consequently, trading is a great thing because it allows everyone to get what they need, and not have everyone make the same thing. Also, it allows countries to form an alliance and bond with one another because they want each other's goods, so they keep their relationship on good terms.
Everything has a cost. There is no free lunch. There is always a trade-off.
even though you may not have to pay cash to enjoy a delicious lunch, you will be giving up other oppurtunities of something else,like a musch more delicious dinner or an amazing sale at dillards that was at the same time as your seemingly free lunch.
Markets Rock! Usually, markets are the best way to allocate scarce resources between producers and consumers.
Markets allow people to express their need or desire for a resource or product through the amount of money that they are willing to spend on it. This means that prices will adjust until all resources are sold to the parties with the greatest need (Market Clearing Price). This means that as resources decrease or increase prices will vary acordingly so that those with the greatest need are provided for.
Everything has a cost. There is no free lunch. There is always a trade-off.
even if you are Billgates or President of U.S or even of world (there ain't one), you need to pay for your lunch. they don't serve it freely in cafeteria (Actually they do, with free lunch program, but the government pays).well this is something short and vague explanation.
The true fact is, every product and service in an economy costs. If you want to buy something, you need to pay for it, as a consumer with the hourly wages you got for your effort. so the cost is effort here. If you want to get diplomatic solutions, sometimes you need to go to a war and that costs a lot. Even if you get a free stuff coupon, you will have to put some time and effort to go get it. all of this is a cost. There is nothing in the world that is free, except for maybe feelings. But still, you got to earn that too
"Everything has a cost. There is no free lunch. There is always a trade-off."
Ok, so if you're something for free, that means someone else had to pay for what you got. For example, If I pay for a date the girl gets a free dinner and movie, but it cost me something to provide that. So nothing is ever really free, unless we somehow get something for free that didnt't require any resources to be used..
Bryan A.
"Everything has a cost. There is no free lunch. There is always a trade-off"
There is always a cost whether from the product or fro production cost. Although there my be something that may seem free to the naked eye, in reality we are paying for the use of the scarce resources used. There is always an opportunity cost to every product.
"Open for trade. Trade can make all parties better off."
The idea of trade is simple, yet fundamental to any society. I have this, you have that, I want that, you want this - WHAT ON EARTH DO WE DO?!? obviously, we would trade this for that, but sometimes it isn't that easy...
Government feels the need to complicate this basic principle of free trade. Instead of a simple exchange that maximizes benefits of each party, world trade is often cluttered by tariffs which torment the consumer with high prices. The desire for tariffs seem reasonable on first examination - the domestic producers will benefit, stimulating employment in the US, making everyone happy, right? Not exactly. Although "protective" tariffs benefit an exclusive group of industrial workers, they limit the amounts of all goods that citizens may purchase. It is better to give consumers the financial means to stimulate industry they desire than to force them to pay more buck for the same bang. I suggest we allow nations to choose what goods they specialize in, then become the best producers they can be. The world economy will take notice and purchase that nation's products simply because the quality is greater, not because their government inhibits their ability to trade freely.
"Everything has a cost. There is no free lunch. There is always a trade-off."
Essentially, there is a comparative cost with EVERYTHING. Take, for example, our current healthcare system:
It works. It is the best in the world. Leaders from other nations come here because of the higher quality. That quality exists because of our higher prices. Those “extra” funds enable advanced research and development. We have the best cancer treatment centers in the world; take a guess as to the reason why. Sure, not every single American has healthcare, but that is a minuscule expense to treat the majority well. They have worked hard for their position in society; they ought to reap the benefits.
Now, to criticize the “free lunch” the current progressive president would like to hand out. Obviously, there is no such thing. He wants to orchestrate a program where every American is covered, but where they are not all paying? Has anyone done the math? How do you cover an additional “47 million” more Americans, without making them pay? You reduce the quality and redistribute it so that more people are covered to a lesser extent. You kill grandma because her “dollar assessed value” is not great enough to justify the expense of healthcare. As long as grandma can pay, let her; the money is great for research and development. I find it interesting that you liberals “have a heart” and yet you’re willing to assign grandma a dollar value, governmentally fund abortions to slaughter an innocent life, and plunge a nation into poverty for nonexistent environmental reasons.
You see, if the system is suddenly paying out more than people are paying into it, it fails. Does Social Security ring a bell? This isn’t going to be a free lunch; it will be the most expensive lunch any of us will ever attend. Price of admission: the best healthcare system in the world. The dessert: the worst.
"Everything has a cost. There is no free lunch. There is always a trade off"
No matter if they say it's free or not, nothing ever goes without costing something. Samples at the grocery store cost the grocery store money, even though its not a lot of food their giving out for free. They expect you to buy the product after tasting it, making them receive a profit with only a small loss from the samples. In this case, size doesn't matter because big or small, everything has a price.
- Travis Menger
"!! Caution: In the short run, falling prices may lead to unemployment, and rising employment may lead to inflation."
Concerning that these situations MAY happen, lets look at each ones causes.
On the supply/demand graph, falling prices are caused by decrease in demand or increase in supply. As businesses start to go towards bankruptcy, prices fall so as to make some money off of leftover goods, but why is more supply also bad? Well, in this case, supply can be bad for employees who can be easily replaced so that increased supplies will allow businesses to invest in better production methods and fire workers.
So how does employment cause the opposite to occur? If workers, either native or foreign, have a high demand for a business, which causes them to hire more people with more money, then prices rise to support wages and stop the flow of currency from leaving businesses. It can be compared to an increase in consumer that balance a decrease in the profits businesses get with more employees, but the reason could be that high prices get people to live where business is cheaper, reducing those that can be employed.
Everything has a cost. There is no free lunch. There is always a trade-off.
While there may be a free giveaway for something, it isn't technically free. For instance, thee could be a handbag giveaway at a boutique, but it wouldn't be free because it would cost the boutique labor and resources to give away those "free" handbags.
Concentrate on productivity. A country’s standard of living depends on how productive its economy is.
This is one of the really basic principles of Economics because if a nation does not produce anything whatso ever it cannot trade. If there is no production of labor, bussinesses, or products there will be absolutly no trade. If there is no trade then there is no way for a country's economy to do anything and if nothing is done economicly than nothing improves. This is because there is no technology produced no food, nothing. However if something is produced you have things to eat or means to move up in the world.
-Kim
"Open for trade. Trade can make all parties better off."
Trading between nations allows for resources to efficiently reach places where they are most needed. If country A has a surplus of item one and country B has scarce reserves of item one, trade allows country B to obtain what it needs while country A makes a profit off of what it doesn't need.
Trade also fosters specialization. Because a country's goods must be able to compete in the global market, producers will specialize in order to exploit its comparative advantages over foreign economies, consequently maximizing the quality and quantity of the goods being produced.
Most importantly, international trade benefits the consumers of all nations involved. By importing goods that are produced by specialized countries, the consumer is offered lower prices than if the good was manufactured domestically.
"Everything has a cost. There is no free lunch. There is always a trade-off."
Something may be free for the consumer but for the producer it means paying for the resources with out receiving money in return. Getting free food means that the consumer is eating while the producer is paying for th consumer to eat.
"One more"
Decisions are made by comparing marginal benefit with marginal costs. As long as the marginal benefit outweighs the marginal cost, the consumer will continue to purchase one more good or service. However, once the marginal benefit is no longer greater than the marginal cost, the consumer will stop purchasing one more good or service. Marginal benefit declines as more items are consumed, but marginal cost remains relatively constant.
"Open for trade. Trade can make all parties better off."
While the United States has a diverse pool of resources to make a variety of products, many other countries don't. These nations must trade with others to get the products they need/want/desire. And just because a nation can make a good doesn't mean that it is the best at making said product. If one country can produce bananas better than anyone else, it should then produce bananas and import its computers from a nation that crafts them best. This specialization on the global scale allows for greater output of goods at using the same technology, labor, and resource pools.
"Everything has a cost. There is no free lunch. There is always a trade-off."
Although it may seem as if you're gaining something without cost, everything has a price attached to it whether its upfront or discreet. Somewhere you are giving up something in order to gain your free meal. Opportunity cost will always factor in.
"Everything has a cost. There is no free lunch. There is always a trade-off."
Whenever a consumer receives something for free, somewhere else the cost is being paid for. Although the free item may not cost the consumer anything, whoever is providing the free item has made sacrifices in choosing to create the product - the cost. This cost is usually monetary, but it is also the accumulation of possibilities the provider could have done instead of providing the free product. This opportunity cost is apparent in any decision, whether it be free or not.
-Gabe Zolayvar
"Everything has a cost. There is no free lunch. There is always a trade-off.
Whenever you receive something for free, there is always a cost. One, there is the cost of what you are giving up. There is always something that you could choose instead that may even be better than what you chose. Two, the company still has to pay for the labor behind making the product. Consider getting a free coupon for a sandwich at subway. You could choose the tradeoff, a free Chick-fil-a sandwich. The company still has to pay for the subway sandwich, but they also may get you to purchase a drink or even come back again to buy a sandwich.
-megan kinneman
"Open for trade. Trade can make all parties better off."
While it may be believed that a closed market may make the domestic market more profitable or stronger, this is far from the truth. The imposition of tariffs or import quotas on a country only serves to stop the development of better products while creating a pricing strain within the domestic market. For other countries it cuts into profits made on exports and may also strain public relations with said country. In other words a free market global society is the best route in that it benefits all with newer, better products that are priced for consumers.
"Cost is what you give up to get something. In particular, opportunity cost is cost of the tradeoff."
Everybody wants material goods and services--there is no getting around that. If people want certain product A, resources must be allocated in order to make that good. As a consequence, product B can't be made because the resources are elsewhere. Going without product B is the cost of having product A, or at least, having less of product B because of product A's resource consumption.
"iNcentives work. People respond to incentives."
Incentives are used all day, everyday, to accomplish goals and make a living. In a way, you can sort of compare incentives to large-scale black mail. People do one thing in order to garner a certain result. If prices for sharpies go up, people will buy comparable markers for a cheaper price. Sellers institute sales and special deals in order to raise demand and in turn, profit.
-Kathleen Clark
pd. 7
Intervention in free markets is sometimes needed.
When a corporation goes power-hungry and forms a monopoly, sometimes a trust-buster must step in to set things right. Monopolies hurt the economy by price-fixing and gouging consumers - the government is needed to step in and fix things.
Sometimes the government goes too far to protect the domestic economy. For example, just before the onset of the Great Depression, the Hawlet-Smoot Act raised the tariff to unprecedented levels in order to stimulate American industry. Instead, the tariffs merely caused retaliatory tariffs to be raised in other countries, rendering in increase in domestic industry moot as there were no foreign customers, hurting everyone in the long run.
Eric Yu - 7th
Everything has a cost. TANSTAAFL
Although something may not cost you any money, it is costing somebody somewhere something. Literally, a free lunch for example, though it may not cost the eater a dime, it us made up of resources and labor that went into creating the meal. Also, the generous lunchlady could have been spending her time and efforts jumping on a trampoline rather than slaving away in the kitchen. So, the "free" lunch does indeed have a cost, an opportunity cost.
E - everything has a cost.
Whenever someone gets something for free, they pay for the business pays for the cost through increased prices of other products. Furthermore, the business gives up the potential product made from the money from the customer.
"Sure, not every single American has healthcare, but that is a minuscule expense to treat the majority well."
So the best healthcare system in the world willingly sacrifices a significant portion of its population (you quoted 47 million) to "treat the majority well"? Sure is elitist in here, the country that was founded on the exact opposite principles.
"They have worked hard for their position in society; they ought to reap the benefits."
I don't think anyone is charging the doctors as being money-grubbing thieves. People are upset with unaffordable insurance.
"He wants to orchestrate a program where every American is covered, but where they are not all paying?"
Has your blind Republican hate caused you to plug your ears as well? It's hard to criticize what you don't listen to. No one is attempting to conjure up a magical plan where everyone has free insurance. The much talked about "public option" is merely a program of government-rin insurance that will break up lucrative local private insurance monopolies by creating competition.
"You kill grandma because her “dollar assessed value” i ... nonexistent environmental reasons."
The rest of your rant is an attack on Liberals ("...you Liberals...") and has little to do with the economy.
"...and plunge a nation into poverty for nonexistent environmental reasons."
Like sending our troops to the Middle East and pouring billions after billions into a search for nonexistent WMDs mirite?
"You see, if the system is suddenly paying out more than people are paying into it, it fails. Does Social Security ring a bell?"
It's been working for the past 240 years, as I recall. And whoops, last time I checked, good ol' US of A was #1. Not saying we should revel in our multi-trillion dollar debt, but as I iterated during lunch today, using tax money to shave 1 trillion off a 14 trillion dollar debt in the midst of 10% unemployment and recession is not going to help much.
-Eric
"Everything has a cost. There is no free lunch. There is always a trade-off."
even though somethings are free for the consumer. there not necessarily "free". Because they have to buy it from a company that prob buys it from another company.
E- everything has a cost. There is no free lunch, there is always a trade off.
Whenever you get a coupon for a free meal, it is not in fact free for the producers. The consumer won't have to pay for the meal, but ultimately the producers are getting hurt beacuase they will have to supply an extra meal free at charge. Similarly, when a store offers sales such as buy one get one free, the producers are affected since they will have to produce twice as much of one product to fulfill the demands. So if we the consumers get two for the price of one, the producers still have to pay for two at the price of two.
"iNcentives work. People respond to incentives."
Supply and demand prove that incentives work. The government offers incentives to companies by offering subsidies to companies that produce a certain good in a certain manner. The company realizing that their supply could be increased reacts and takes advantage of the subsidies.
Other governmental negative incentives such as enforced payment of externalities (carbon tax) strongly encourages companies to reduce their emissions in order to save money. Incentives work because business decisions are almost always based on maximizing profit.
E- Everything has a cost.
The principle that nothing is freee is a universal statement not just in economics but also in life. For instance in a university they may offer students "free" tutoring or counseling which is in fact something you have already paid for in your tuition and fees. This principle is very essential to the study of the economy because people must realize that every decision that is made costs something.
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