Ten Key Principles of Economics

1. Everything has a cost. There is no free lunch. There is always a trade-off.
2. Cost is what you give up to get something. In particular, opportunity cost is cost of the tradeoff.
3. One More. Rational people make decisions on the basis of the cost of one more unit (of consumption, of investment, of labor hour, etc.).
4. Incentives work. People respond to incentives.
5. Open for trade. Trade can make all parties better off.
6. Markets Rock! Usually, markets are the best way to allocate scarce resources between producers and consumers.
7. Intervention in free markets is sometimes needed. (But watch out for the law of unintended effects!)
8. Concentrate on productivity. A country’s standard of living depends on how productive its economy is.
9. Sloshing in money leads to higher prices. Inflation is caused by excessive money supply.!!
10. Caution: In the short run, falling prices may lead to unemployment, and rising employment may lead to inflation.



Saturday, October 30, 2010

Americans Are Misinformed When It Comes To The Economy

The link takes you to an article declaring the misinformation that is rife in America today. Most of our citizens carry inaccurate opinions on the status of the Economy and the government's finances. This is disheartening since they are about to make some pretty important decisions.

1. What does the reader believe to be the single biggest reason for this level of misinformation in our society today? Explain.

2. Why might it be easy to understand that, faced with the facts, individual households could still be skeptical about the macro realities?

3. If these represent the opinions Americans are taking to the polls, what impact will this have on Tuesday's election and the coming years in our national and state Capitols?

4. Can you make a connection, as students, between the disintegration of objective media, the rise of polarizing and uncivil relations in our politics, the disappearance of well-guided public education, and this level of misdirection among the electorate?

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