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1、INTHISCHAPTERYOUWILL...Discusshowincentivesaffectpeople’sbehaviLearnthemeaningofopptunitycostLearnthateconomicsisabouttheallocationofscarceresourcesExaminesomeofthetradeoffsthatpeoplefaceSeehowtousemarginalreasoningwhenm
2、akingdecisionsThewdeconomycomesfromtheGreekwdf“onewhomanagesahousehold.”Atfirstthisiginmightseempeculiar.Butinfacthouseholdseconomieshavemuchincommon.Ahouseholdfacesmanydecisions.Itmustdecidewhichmembersofthehouseholddow
3、hichtaskswhateachmembergetsinreturn:WhocooksdinnerWhodoesthelaundryWhogetstheextradessertatdinnerWhogetstochoosewhatTVshowtowatchInshtthehouseholdmustallocateitsscarceresourcesamongitsvariousmemberstakingintoaccounteachm
4、ember’sabilitiesefftsdesires.Likeahouseholdasocietyfacesmanydecisions.Asocietymustdecidewhatjobswillbedonewhowilldothem.Itneedssomepeopletogrowfoodotherpeopletomakeclothingstillotherstodesigncomputersoftware.Oncesocietyh
5、asallocatedpeople(aswellaslbuildingsmachines)tovariousjobsTENPRINCIPLESOFECONOMICS3ConsiderwhytradeamongpeoplenationscanbegoodfeveryoneDiscusswhymarketsareagoodbutnotperfectwaytoallocateresourcesLearnwhatdeterminessometr
6、endsintheoveralleconomyCHAPTER1TENPRINCIPLESOFECONOMICS5considerparentsdecidinghowtospendtheirfamilyincome.Theycanbuyfoodclothingafamilyvacation.theycansavesomeofthefamilyincomefretirementthechildren’scollegeeducation.Wh
7、entheychoosetospendanextradollarononeofthesegoodstheyhaveonelessdollartospendonsomeothergood.Whenpeoplearegroupedintosocietiestheyfacedifferentkindsoftradeoffs.Theclassictradeoffisbetween“gunsbutter.”Themewespendonnation
8、aldefensetoprotectourshesfromfeignaggresss(guns)thelesswecanspendonconsumergoodstoraiseourstardoflivingathome(butter).Alsoimptantinmodernsocietyisthetradeoffbetweenacleanenvironmentahighlevelofincome.Lawsthatrequirefirms
9、toreducepollutionraisethecostofproducinggoodsservices.Becauseofthehighercoststhesefirmsendupearningsmallerprofitspayinglowerwagesginghigherpricessomecombinationofthesethree.Thuswhilepollutionregulationsgiveusthebenefitof
10、acleanerenvironmenttheimprovedhealththatcomeswithittheyhavethecostofreducingtheincomesofthefirms’ownerswkerscustomers.Anothertradeoffsocietyfacesisbetweenefficiencyequity.Efficiencymeansthatsocietyisgettingthemostitcanfr
11、omitsscarceresources.Equitymeansthatthebenefitsofthoseresourcesaredistributedfairlyamongsociety’smembers.Inotherwdsefficiencyreferstothesizeoftheeconomicpieequityreferstohowthepieisdivided.Oftenwhengovernmentpoliciesareb
12、eingdesignedthesetwogoalsconflict.Considerfinstancepoliciesaimedatachievingameequaldistributionofeconomicwellbeing.Someofthesepoliciessuchasthewelfaresystemunemploymentinsurancetrytohelpthosemembersofsocietywhoaremostinn
13、eed.Otherssuchastheindividualincometaxaskthefinanciallysuccessfultocontributemethanotherstosupptthegovernment.Althoughthesepolicieshavethebenefitofachievinggreaterequitytheyhaveacostintermsofreducedefficiency.Whenthegove
14、rnmentredistributesincomefromtherichtothepoitreducestherewardfwkinghardasaresultpeoplewklessproducefewergoodsservices.Inotherwdswhenthegovernmenttriestocuttheeconomicpieintomeequalslicesthepiegetssmaller.Recognizingthatp
15、eoplefacetradeoffsdoesnotbyitselftelluswhatdecisionstheywillshouldmake.Astudentshouldnotabonthestudyofpsychologyjustbecausedoingsowouldincreasethetimeavailablefthestudyofeconomics.Societyshouldnotstopprotectingtheenviron
16、mentjustbecauseenvironmentalregulationsreduceourmaterialstardofliving.Theposhouldnotbeignedjustbecausehelpingthemdisttswkincentives.Nohelessacknowledginglife’stradeoffsisimptantbecausepeoplearelikelytomakegooddecisionson
17、lyiftheyundersttheoptionsthattheyhaveavailable.PRINCIPLE#2:THECOSTOFSOMETHINGISWHATYOUGIVEUPTOGETITBecausepeoplefacetradeoffsmakingdecisionsrequirescomparingthecostsbenefitsofalternativecoursesofaction.Inmanycaseshowever
18、thecostofsomeactionisnotasobviousasitmightfirstappear.Considerfexamplethedecisionwhethertogotocollege.Thebenefitisintellectualenrichmentalifetimeofbetterjobopptunities.ButwhatisthecostToanswerthisquestionyoumightbetempte
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