Notes: Economic Principles

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Economic principles The economic theory and literature are extremely complex, elaborate and filled with specific information. Still, some of this information is difficult to processes and implement by a novice economist, or sometimes even by a practicing economist, rather than a theoretician. Harvard Professor Gregory Mankiw has identified this shortage of the specialized literature and has strived to enunciate ten critical economic principles, which can be easily understood and applied by all. These principles refer to the following: (1) People encounter tradeoffs as they need to choose from several alternatives (2) The opportunity costs is paid and it refers to the things which will be sacrificed (3) Logical and rational people think at the margin (4) People respond to incentives (5) Trade can generate advantages for all parties (6) The market places represent viable places to organize economic activity (7) The federal institutions can sometimes improve the market conditions and outcomes (8) National production is a direct indicator of a country's standard of living (9) Federal printing of too much money results in price increases (10) Inflation and unemployment generate a short term tradeoff for the population (Mankiw, 2011). In order to better understand the applicability of these ten principles by Gregory Mankiw, it is useful to assess them in the context of a familiar situation, such as the decision of an economic agent to upgrade its technologic

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