Instructor Manual: Mankiw, Principles of Economics, 10e, 9780357722718;
Chapter 1: Ten Principles of Economics
Instructor Manual
Mankiw, Principles of Economics, 10e, 9780357722718; Chapter 1: Ten Principles of
Economics
TABLE OF CONTENTS
Purpose and Perspective of the Chapter ....................................................................................................... 2
Chapter Objectives ................................................................................................................................................ 2
Complete List of Chapter Activities and Assessments .............................................................................. 3
Key Terms ................................................................................................................................................................ 3
What's New in This Chapter ............................................................................................................................... 4
Chapter Outline ...................................................................................................................................................... 4
Solutions to Text Problems ................................................................................................................................ 9
Questions for Review .........................................................................................................................................................9
Problems and Applications ........................................................................................................................................... 10
Additional Activities and Assignments ....................................................................................................... 13
Additional Resources ........................................................................................................................................ 14
Cengage Video Resources .............................................................................................................................................. 14
1
, Instructor Manual: Mankiw, Principles of Economics, 10e, 9780357722718;
Chapter 1: Ten Principles of Economics
PURPOSE AND PERSPECTIVE OF THE CHAPTER
Chapter 1 is the first chapter in a three-chapter section that serves as the introduction to the text.
Chapter 1 introduces ten fundamental principles on which the study of economics is based. In a
broad sense, the rest of the text is an elaboration on these ten principles. Chapter 2 will develop
how economists approach problems while Chapter 3 will explain how individuals and countries
gain from trade.
The purpose of Chapter 1 is to lay out ten economic principles that will serve as building blocks for
the rest of the text. The ten principles can be grouped into three categories: how people make
decisions, how people interact, and how the economy works as a whole. Throughout the text,
references will be made repeatedly to these ten principles.
Key points addressed in this chapter:
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 behavior in response to the incentives they
face.
The fundamental lessons about economic interactions among people are that trade and
interdependence can be mutually beneficial, that markets are usually a good way of
coordinating economic activity, and that the government can potentially improve market
outcomes by remedying a market failure or by promoting greater economic equality.
The fundamental lessons about the economy as a whole are that productivity is the ultimate
source of improving living standards, that growth in the quantity of money is the ultimate
source of inflation, and that society faces a short-run trade-off between inflation and
unemployment.
CHAPTER OBJECTIVES
The following objectives are addressed in this chapter:
Explain how scarcity influences decisions.
Explain how individuals evaluate opportunity costs to make decisions.
Explain how marginal analysis influences decision making.
Apply basic, economic principles of individual decision making that determine how an
economy generally works.
Explain how the terms of trade can lead to gains.
Given a scenario, identify the distribution system being used.
2
, Instructor Manual: Mankiw, Principles of Economics, 10e, 9780357722718;
Chapter 1: Ten Principles of Economics
COMPLETE LIST OF CHAPTER ACTIVITIES AND ASSESSMENTS
The following table organizes activities and assessments so that you can make decisions about
which content you would like to emphasize in your class. For additional guidance, refer to the
Teaching Online Guide.
Activity/Assessment Source (i.e., PPT slide, Duration
Workbook)
Icebreaker Activity PPT Slide 2 5–10 mins.
Active Learning 1 PPT Slide 14 5 mins.
Active Learning 2 PPT Slide 17 5 mins.
Active Learning 3 PPT Slide 28 20–25 mins.
Think-Pair-Share Activity PPT Slide 39 5–10 mins.
Self-Assessment PPT Slide 40 5–10 mins.
Section 01-1 QuickQuiz MindTap eBook 5 mins.
Section 01-2 QuickQuiz MindTap eBook 5 mins.
Section 01-3 QuickQuiz MindTap eBook 5 mins.
ConceptClip: Efficiency MindTap Learn It Folder 5 mins.
ConceptClip: Opportunity Cost MindTap Learn It Folder 5 mins.
ConceptClip: Externality MindTap Learn It Folder 5 mins.
Chapter 01 Problems & Applications MindTap Study It Folder 45–60 mins.
Chapter 01 A+ Test Prep MindTap Study It Folder N/A
Chapter 01 Homework MindTap Apply It Folder 30–45 mins.
Chapter 01 Quiz: Ten Principles of MindTap Apply It Folder 20–30 mins.
Economics
[return to top]
KEY TERMS
Business Cycle: fluctuations in economic activity, such as employment and production
Economics: the study of how society manages its scarce resources
Efficiency: the property of society getting the most it can from its scarce resources
Equality: the property of distributing economic prosperity uniformly among the members of
society
Externality: the uncompensated impact of one person’s actions on the well-being of a bystander
Incentive: something that induces a person to act
Inflation: an increase in the overall level of prices in the economy
Marginal Change: an incremental adjustment to a plan of action
3
, Instructor Manual: Mankiw, Principles of Economics, 10e, 9780357722718;
Chapter 1: Ten Principles of Economics
Market Economy: an economy that allocates resources through the decentralized decisions of
many firms and households as they interact in markets for goods and services
Market Failure: a situation in which a market left on its own does not allocate resources efficiently
Market Power: the ability of a single economic actor (or small group of actors) to have a
substantial influence on market prices
Opportunity Cost: whatever must be given up to obtain some item
Productivity: the quantity of goods and services produced from each unit of labor
Property Rights: the ability of an individual to own and exercise control over scarce resources
Rational People: people who systematically and purposefully do the best they can to achieve their
objectives
Scarcity: the limited nature of society’s resources
[return to top]
WHAT'S NEW IN THIS CHAPTER
The following elements are improvements in this chapter from the previous edition:
An expanded discussion of inflation in the United States following the coronavirus recession
of 2020.
[return to top]
CHAPTER OUTLINE
The following outline organizes activities (including any existing discussion questions in
PowerPoints or other supplements) and assessments by chapter (and therefore by topic), so that
you can see how all the content relates to the topics covered in the text.
I. Introduction
A. The word “economy” comes from the Greek word oikonomos meaning “one who
manages a household.”
1. Instruction Idea: Begin by pointing out that economics is a subject that
students must confront in their daily lives. Point out that they already
spend a great deal of their time thinking about economic issues: changes in
prices, buying decisions, use of their time, concerns about employment,
etc.
B. Both households and economies face many decisions about how to allocate
resources.
C. Resources are scarce so they must be managed carefully.
4
Chapter 1: Ten Principles of Economics
Instructor Manual
Mankiw, Principles of Economics, 10e, 9780357722718; Chapter 1: Ten Principles of
Economics
TABLE OF CONTENTS
Purpose and Perspective of the Chapter ....................................................................................................... 2
Chapter Objectives ................................................................................................................................................ 2
Complete List of Chapter Activities and Assessments .............................................................................. 3
Key Terms ................................................................................................................................................................ 3
What's New in This Chapter ............................................................................................................................... 4
Chapter Outline ...................................................................................................................................................... 4
Solutions to Text Problems ................................................................................................................................ 9
Questions for Review .........................................................................................................................................................9
Problems and Applications ........................................................................................................................................... 10
Additional Activities and Assignments ....................................................................................................... 13
Additional Resources ........................................................................................................................................ 14
Cengage Video Resources .............................................................................................................................................. 14
1
, Instructor Manual: Mankiw, Principles of Economics, 10e, 9780357722718;
Chapter 1: Ten Principles of Economics
PURPOSE AND PERSPECTIVE OF THE CHAPTER
Chapter 1 is the first chapter in a three-chapter section that serves as the introduction to the text.
Chapter 1 introduces ten fundamental principles on which the study of economics is based. In a
broad sense, the rest of the text is an elaboration on these ten principles. Chapter 2 will develop
how economists approach problems while Chapter 3 will explain how individuals and countries
gain from trade.
The purpose of Chapter 1 is to lay out ten economic principles that will serve as building blocks for
the rest of the text. The ten principles can be grouped into three categories: how people make
decisions, how people interact, and how the economy works as a whole. Throughout the text,
references will be made repeatedly to these ten principles.
Key points addressed in this chapter:
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 behavior in response to the incentives they
face.
The fundamental lessons about economic interactions among people are that trade and
interdependence can be mutually beneficial, that markets are usually a good way of
coordinating economic activity, and that the government can potentially improve market
outcomes by remedying a market failure or by promoting greater economic equality.
The fundamental lessons about the economy as a whole are that productivity is the ultimate
source of improving living standards, that growth in the quantity of money is the ultimate
source of inflation, and that society faces a short-run trade-off between inflation and
unemployment.
CHAPTER OBJECTIVES
The following objectives are addressed in this chapter:
Explain how scarcity influences decisions.
Explain how individuals evaluate opportunity costs to make decisions.
Explain how marginal analysis influences decision making.
Apply basic, economic principles of individual decision making that determine how an
economy generally works.
Explain how the terms of trade can lead to gains.
Given a scenario, identify the distribution system being used.
2
, Instructor Manual: Mankiw, Principles of Economics, 10e, 9780357722718;
Chapter 1: Ten Principles of Economics
COMPLETE LIST OF CHAPTER ACTIVITIES AND ASSESSMENTS
The following table organizes activities and assessments so that you can make decisions about
which content you would like to emphasize in your class. For additional guidance, refer to the
Teaching Online Guide.
Activity/Assessment Source (i.e., PPT slide, Duration
Workbook)
Icebreaker Activity PPT Slide 2 5–10 mins.
Active Learning 1 PPT Slide 14 5 mins.
Active Learning 2 PPT Slide 17 5 mins.
Active Learning 3 PPT Slide 28 20–25 mins.
Think-Pair-Share Activity PPT Slide 39 5–10 mins.
Self-Assessment PPT Slide 40 5–10 mins.
Section 01-1 QuickQuiz MindTap eBook 5 mins.
Section 01-2 QuickQuiz MindTap eBook 5 mins.
Section 01-3 QuickQuiz MindTap eBook 5 mins.
ConceptClip: Efficiency MindTap Learn It Folder 5 mins.
ConceptClip: Opportunity Cost MindTap Learn It Folder 5 mins.
ConceptClip: Externality MindTap Learn It Folder 5 mins.
Chapter 01 Problems & Applications MindTap Study It Folder 45–60 mins.
Chapter 01 A+ Test Prep MindTap Study It Folder N/A
Chapter 01 Homework MindTap Apply It Folder 30–45 mins.
Chapter 01 Quiz: Ten Principles of MindTap Apply It Folder 20–30 mins.
Economics
[return to top]
KEY TERMS
Business Cycle: fluctuations in economic activity, such as employment and production
Economics: the study of how society manages its scarce resources
Efficiency: the property of society getting the most it can from its scarce resources
Equality: the property of distributing economic prosperity uniformly among the members of
society
Externality: the uncompensated impact of one person’s actions on the well-being of a bystander
Incentive: something that induces a person to act
Inflation: an increase in the overall level of prices in the economy
Marginal Change: an incremental adjustment to a plan of action
3
, Instructor Manual: Mankiw, Principles of Economics, 10e, 9780357722718;
Chapter 1: Ten Principles of Economics
Market Economy: an economy that allocates resources through the decentralized decisions of
many firms and households as they interact in markets for goods and services
Market Failure: a situation in which a market left on its own does not allocate resources efficiently
Market Power: the ability of a single economic actor (or small group of actors) to have a
substantial influence on market prices
Opportunity Cost: whatever must be given up to obtain some item
Productivity: the quantity of goods and services produced from each unit of labor
Property Rights: the ability of an individual to own and exercise control over scarce resources
Rational People: people who systematically and purposefully do the best they can to achieve their
objectives
Scarcity: the limited nature of society’s resources
[return to top]
WHAT'S NEW IN THIS CHAPTER
The following elements are improvements in this chapter from the previous edition:
An expanded discussion of inflation in the United States following the coronavirus recession
of 2020.
[return to top]
CHAPTER OUTLINE
The following outline organizes activities (including any existing discussion questions in
PowerPoints or other supplements) and assessments by chapter (and therefore by topic), so that
you can see how all the content relates to the topics covered in the text.
I. Introduction
A. The word “economy” comes from the Greek word oikonomos meaning “one who
manages a household.”
1. Instruction Idea: Begin by pointing out that economics is a subject that
students must confront in their daily lives. Point out that they already
spend a great deal of their time thinking about economic issues: changes in
prices, buying decisions, use of their time, concerns about employment,
etc.
B. Both households and economies face many decisions about how to allocate
resources.
C. Resources are scarce so they must be managed carefully.
4
