Principles Of Economics
Ten principles of economics.
The word economy comes from a Greek word for "one who manages a household."
①People face tradeoffs.
1.To get one thing,we usually have to give up another thing.
◆guns v. butter
◆food v. clothing
◆leisure time v. work
◆efficiency v. equity
*Making decisions requires trading off one goal against another.
The cost of something is what you give up to get it.
Rational people think at the gargin.
People respond to incentives.

②The cost of something is what you give up to get it.
Decisions require comparing costs and benefits of alternatives.
◆Whether to go to college or to work?
◆Whether to study or go out on a date?
◆Whether to go to class or sleep in?
*The opportunity cost of an item is what you give up to abtain that item.
benefit ['benɪfɪt]
n. 利益，好处；救济金
vt. 有益于，对…有益
vi. 受益，得益
alternative [ɔːl'tɜːnətɪv; ɒl-]
adj. 供选择的；选择性的；交替的
n. 二中择一；供替代的选择

③Rational people think at the margin.
Marginal changes are small,incremental adjustments to an existing plan of action.
People make decisions by comparing costs and benefits at the margin.

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④People respond to incentives.
◆Marginal changes in costs or benefits motivate people to respond.
◆The decision to choose one alternative over another occurs when that alternative's marginal benefits exceed its marginal costs!

⑤Trade can make everyone better off.
◆People gain from their ability to trade with one another.
◆Competition results in gains from trading.
◆Trade allows people to specialize in what they do best.

6.Markets are usually a good way to organize economoc activity.
◆In a market economy,households decide what to buy and who to work for.
◆Firms decide who to hire and what to produce.
Adam Smith made the observation that households and firms interacting in markets act as if guided by an "invisible hand."

比较优势：国家应该生产与他国比较起来有优势的产品，然后进口比较劣势的产品

无形之手（Invisiable hand）：市场自身的调控
有形之手（Visiable hand）：政府通过政策和介入干预进行调控

市场三要素
1.seller
2.buyer
3.products

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Number one:The Invisible Hand
An economy is a tricky thing to control,and governments are always trying to figure out how to do it.Back in 1776 economist Adam Smith shocked everyone by saying that what governments should actually do is just leave people alone to buy and sell freely among themselves.
He suggested that if they just leave self-interested traders to compete with one another,markets are guided to positive outcomes "as if by an invisible hand".If someone charges less than you customers will buy from them instead as you have to lower the price or offer something better.
Wherever enough people demand something,they will be supplied by the market like spoilt children only in this case,everyone is happy.Later free-marketeers like Austrian economist Friedrich Hayek,argued that this "hands off" approach actually works better than any kind of central plan.
But the problem is,economies can take a long time to reach their "equilibrium",and may even stall along the way.And in the meantime people can get a little frustrated,which is why governments usually end up taking things into their own more visible hands instead.

7.Governments can sometimes improve market outcomes.
When the market fails,government can intervence to promote efficiency and equity.
Market failure occurs when the market fails to allocate resources efficienty.
Market failure may be caused by an externality,which is the impact of one person or firm's actions on the well-being of a bystander.