Principles of Economics
Compilation Document
Contents
Principles of economics tutorial 1 18-9..................................................................................................2
Principles of economics tutorial 2 2-10..................................................................................................3
Principles of economics tutorial 3 16-10................................................................................................4
Principles of economics tutorial 4 20-11................................................................................................6
Principles of economics tutorial 5 4-12..................................................................................................9
1
, Principles of economics tutorial 1 18-9
Mock assignment:
- Choices are necessary because resources are scarce
- If you have a certain amount of resources you can choose
to use up all those resources to produce one product
- You can also choose to use all the resources to produce
another product
- But a third option is to use the resources to produce both
products
- You can choose to not use up all the resources and
produce less than u actually are able to
- But this wouldn’t be efficient. A producer gains more
from utilizing his entire production capability.
- This way markets usually lead to efficiency
Notes:
Margin and opportunity cost are very confusing and difficult concepts
Markets are institutionalized and politically constructed
Study 12 basic principles of economics!
- Choices are necessary because resources are scarce
- The true cost of something is its opportunity cost
- ‘How much’ is a decision at the margin
- People usually respond to incentives
- There are gains from trade
- Markets move toward equilibrium
- Resources should be used efficiently to achieve society’s goals
- Markets usually lead to efficiency
- When markets fail government intervention can improve society’s welfare
- One person’s spending is another person’s income
- Overall spending sometimes gets out of line with the economy’s productive capacity
- Government policies can change spending
Ceteris paribus: all other variables are equal
∆Y ∆X
=opportunity costs X =opportunity costs Y
∆X ∆Y
Overtime it becomes harder to realize the same production because resources can become
exhausted/old
The person who has the comparable advantage is the person who has to give up the least to
produce a certain product
Price is independent! Supply and demand dependant.
2
Compilation Document
Contents
Principles of economics tutorial 1 18-9..................................................................................................2
Principles of economics tutorial 2 2-10..................................................................................................3
Principles of economics tutorial 3 16-10................................................................................................4
Principles of economics tutorial 4 20-11................................................................................................6
Principles of economics tutorial 5 4-12..................................................................................................9
1
, Principles of economics tutorial 1 18-9
Mock assignment:
- Choices are necessary because resources are scarce
- If you have a certain amount of resources you can choose
to use up all those resources to produce one product
- You can also choose to use all the resources to produce
another product
- But a third option is to use the resources to produce both
products
- You can choose to not use up all the resources and
produce less than u actually are able to
- But this wouldn’t be efficient. A producer gains more
from utilizing his entire production capability.
- This way markets usually lead to efficiency
Notes:
Margin and opportunity cost are very confusing and difficult concepts
Markets are institutionalized and politically constructed
Study 12 basic principles of economics!
- Choices are necessary because resources are scarce
- The true cost of something is its opportunity cost
- ‘How much’ is a decision at the margin
- People usually respond to incentives
- There are gains from trade
- Markets move toward equilibrium
- Resources should be used efficiently to achieve society’s goals
- Markets usually lead to efficiency
- When markets fail government intervention can improve society’s welfare
- One person’s spending is another person’s income
- Overall spending sometimes gets out of line with the economy’s productive capacity
- Government policies can change spending
Ceteris paribus: all other variables are equal
∆Y ∆X
=opportunity costs X =opportunity costs Y
∆X ∆Y
Overtime it becomes harder to realize the same production because resources can become
exhausted/old
The person who has the comparable advantage is the person who has to give up the least to
produce a certain product
Price is independent! Supply and demand dependant.
2
