CHAPTER 1: TEN PRINCIPLES OF ECONOMICS

- SCARCITY – basic problem, gap between limited resources and thereotically limitless
wants.
- Economy = management of a household
- Economics: how society manages scarce resources -> how people decide what to buy
how much to work save spend, how firms decide how much to produce how many
workers to hire, how society decides, how
 How to allocate resources: market price, command, mảoity rule, contest, 1 come 1
serve, lottery, personal characteristíc, force
 PRINCIPLE 1: PEOPLE FACE TRADEOFFS
#Efficiency: society – maximum benefits from scarce resources; size and distribution
#Equality
 To achieve greater equality, could redistribute income from wealthy to poor. But this
reduces incentive to work and produce, shrinks the size of the economic pic.

 PRINCIPLE 2: THE COST OF STH IS WHAT YOU WANT TO GIVE UP

- Bcs people face trade offs when making choices -> making decisions require compảing
the costs and benefits of alternative choices; the opportunity cost of any item;
- The opportunity cost

 PRINCIPLE 3: RATIONAL PEOPLE THINK AT THE MARGIN (ng lí trí thì

- Rational people: nghĩ systematically, purposefully, qdinh bằng evaluate cost and benefit
of marginal changes (thay đổi) – incremental adjustments to an existing plan -> only
take action khi benefit > cost (marginal bene – change or increse in total bene from
choice; marginal cost)

 PRINCIPLE 4: PEOPLE RESPOND TO INCENTIVES

- Incentive induces people to work

 YOU SHOULD EXAMINE WHETHER THE RXXTRA REVENUE FROM SELLING THE
ADDITIONAL POTION WOULD BE GREATER OR SMALLER THAN THE EXTRA COST.
 PRINCIPLE 5: TRADE CAN MAKE EVERYONE BETTER OFF.
- Rather than being self-sufficient, people can speacialize in producing one good orr
service and exchange it for other goods. -> Speacialization allows person. Country to
speacialize in the activities he/ she does best.
- Countries also benefit from trade/ speacialization -> Get a better price
(?) WWhich good are more cheaply from abroad than could be produced in vn? – electronic ><
rice, agricultural product
 PRINCIPLE 6: MARKETS ARE USU A GOOD WAY TO ORGANIZE ECONOMIC ACTIVITY
- Market: a group of buyers and seller ( need not be in a single location)
- Organize eco activity means determineing wwhat goods to produce, how to produce
tham, how much of each to produce, who gets them
- A market economy allocate resources through the decentralized decisions of many
households and firms ass they interact in the markets. -> each of these households and
firms acts as if led by an INVISIBLE HAND to promote general economic well-being
- The invisible hand workds through the price system
+ The interactions of buyer – seller determines price
+ Each price reflect the good’S value to buyers and the cost of producing the good
+ Prices guide self-interested household and firm to make decision that in many cases
maximize society economic well-being.
 PRINCIPLE 7: GOVERNMENTS CAN SOMETIMES IMRPOVE MARKET OUTCOMES
- Property rights: the ability of an individual to own and ecercise control over scarce
resources. – QUYEN SO HUU
- People are less inclined to work, produce, invest or purchase if large risk of their
property being stolen.

- Market failure: when the market fails to allocate society’s resources efficiently

 Cause:
+ Externalities: when the production/ consumption of a good affects bystanders
+ Market power: a single buyer or seller has substantial influence on market price
+ In such case, public policy may promote efficiency (monopoly DOC QUYEN, subd
PHAN PHOI)
 PRINCIPLE 8: A COUNTRY’S TRANDARD OF LIVING DEPENDS ON ITS ABILITY TO PRODUCE
GOOODS & SERVICES
- Huge variation in living standards across countries and over time:
+ Average income in rich countries is more than ten times average income in poor
countries.
+ The US standard of living today is about 8 times larger than 100 years ago. [
- The most impotant determinant of living standard is PRODUCTIVITY – the amount of
goods and services produced per unit of labor.
- Productivity depends on the equipment, skills, and tech available to workers.
 PRINCIPLE 9: PRICES RISE WHEN THE GOV PRINTS TO MUCH MONEY
 INFLATION: increase in the general lv of prices. >< deflation
- In the long rung, inflation is almost always caused by excessive growth in the quantity of
money, which causes the value of money to fall.
- The faster the government creates money, the greater the inflation rate.
 PRINCIPLE 10: SOCIETY FACES A SHORT-RUN TRADEOFF BETWEEN INFLATION AND
UNEMPLOYMENT
- Short run (1-2y) effects of money growth:
+ stimulate the overall level of spending -> increase the demand for good and services
+ Firm raise prices and hire more workers to produce larger quantity of goods and
services -> lower unemployment.
 Phillip curve: trade off between unemployment and inflate – stable and inverse rela
+ inverse rela, nega correlation between the rate of unemployment and the rate of
inflation
 + important to plocicy makers to monerory and fiscal policy wwhen they attempt to
influence…
 WWhat are effective policies to reduce natural reate of unemployment?

 CHAPTER SUMMARY:

CHAPTER 2:
- The ecobnomist has 2 roles: scientist try to explain the world; policy advisors
- Sciencetific method: observation thẻoy and moree observation; make consumption
- Role of consumption: simplìy the complex world; focus on thinking essence
- Different assumption: 2 countries, ? kinds of goods
- The cônmist
+ as scientist make positive statement to describe the world
+ as policy advisor make normative statement prescribe how the world should be
Có thể bị cofiem hoặc refuse
#1. Circular-flow diagram (nhớ cách vẽ)
- A visual model of the cônmy, shows how dollars flow through markets among
households and firms. (2markets: for products and servicé, markets for factors of
production; 2 participants)
- Firm: buy/ hire factors of production, use them to produce; sell goods services
- Households: own the factors of prodcuttion, sell/ rent them to firms for income; buy
and consume goods and services.
#2: The production possibilities frontier
- The ppf: a graph that shows the combination of 2 goods the economy can possibly
produce given the available resources and the available technology
Example: 2 goods: computers and wheat; 1 resource: labor (measured in hours); eocnomy has
50000 labor hours per month available for production.

production production product product

computers wheat Computer wheat
a 50000 0 500 0
b 40000 10000 400 1000
C 25000 25000 250 2500
D 10000 40000 100 4000
E 0 50000 0 5000

 Points on the ppf (like a -f): possible. Efficient: all resourcé are fully uitilized
 Points under the ppf (like f): possoible, not efficient: some resources underutilized
 Points outside the ppf
 - The ppf and oppr cost: the slope of a line equals the rise over the run, the amount of the
line ríed ưheen you move to the right by one unit. Here the oppr cost of a computer is
10 tons a wheat -> slope (rise over the run chia cho aays, trục tung chia trục hoành, phải
mang dấu trừ để thwr hiện sự trade off lúc ghi phép tính, nhưng khi lấy kết quả ghi kết
quả thì ph cho vô giá trị tuyệt đối lấy kq dương)
 The shape of the ppf
- It could be a straight line, or bow-shaped
- Depends on what happens to oppr cost as economy shifts resources from one industry
to the other:
+ if oppor cost remains constant, ppf is a straight line
+ if oppor cost of a good rises as more of the good is produced, ppf is bow-shaped (bởi
vì là mỗi công nhân thì lại có kĩ năng, opppr khác biệt chứ kp ai cx giống ai)
 Law of icnreasing oppr cost: as you ráie the procution of one good, the oppr cost to
produce the additional foood will grow
 Khi có tiến boiih jhoa học công nghệ thì ppf có xu hướng chuyển dịch ra ngoài vì xã
hội có thể sxuat dc nhiều hơn

#3: Microeco and macroeco

- Mic; how households and firms make decisions and how they interact in markets
- Mac: study of economy-wide phenomena, including inflation, unemployment, and eco
growth
- Thsee 2 closy interwine, yet distince; address diff ques

CHAPTER 3: INTERDEPENDENCE AND THE GAINS FROM

TRADE
 Interdependence: sự phụ thuộc lẫn nhau -> goods and services from many ciuntries
around the world (nhg nước chỉ nên tập trung vào làm cgi mình giỏi nhất thôi)
1. INTERDEPENCE
- Trade can make everyone better off
- Import: hàng bought in one country that was produced in another >< Export: hàng
produced in one country and sold to buýe in another contry. (khi nhập khẩu nhiều hơn
xuất thì là thâm hụt thương mai, ngược lại là thặng dư thương mại – trade deficit ><
trade surplus)
VD. MỸ VÀ NHẬT – Hàng là cp và wheat, source là labor
TH1: Mỹ có 50000 hours of labor mỗi tháng, làm 1 cp thì cần 100 hours of labor, 1 ton
wheat thì cần 10 hours of labor. (xd 2 điểm trên trục tung hoành r nối vào là xong)
 The us có đủ labor để sx or any combination along the ppf
 Mỹ dùng nửa để sx cả hai thì chỉ ra dc 250 cp và 2500 wheat -> without trade, a
country consumes what it produces
TH2: Nhật có 30k giờ lao động, sx cp cần 125h, 1 ton wheat thì cần 25h
 Japan has enough labor to produce 240cp or 1200 tón of wheat or ….
  Suppose dùng nửa để sx -> có 120cp and 600 tons of whear
->Compare consumption withougt trade to consumption with trade. See how much of each
good is produced and traded by 2 countries

2. COMPARATIVE AND OPPORTUNITY COST

 Comparative adv: the ability to produce a good at a lower oppr cost than another
producer. Để so sánh cần tính oppr cost của mỗi country.
 Absolute adv: the ability to produce a good using fewer inputs than another producer
- Its possible for 1 person to have an absolute adv in both goods
- Its impossible for 1 person to have a comparative adv in both goods

CHAPTER 4: MARKET AND COMPETITIONS

 Market: a group of buýe and sellers of a particular product
 Competitive market: one with many buyers and sellers, each has a negligible effect on
price
 Perfectly competitive market: all goods exasctly the same; buýe and sellers so numerous
that no one can affect market price – each is a price taker
- Markets are assumed to be
1. Demand
- Demand comes from the behavir of buyers
- The quantity demanded of any goods is the amount of good that buyers are willing and
able to purchase
- Demand schedule: a table shows the rela between the price of a good and the quantity
demanded
- Demand curve shows how peice affecrs quantity demanded, other things being equal.
(non-price determinants, things that dêtrrmine buýe demand for a good, other than the
goood’S price…)
+ Number of buyers: tăng thì quantity demanded tăng -> shift sang phải
+ Income of buyers: Mình có 2 hàng hoá là normal goods (hàng thông thường) và inferior goods
(hàng thứ cấp): normal thì có positive rela với income còn inferior có negative rela với income
nên khi income tăng thì D của normal dịch phải, của inferior dịch trái
 Engel curve: attitude toward any goods dêpnd on income, not goods quality
- 2 goods are substitute if an increase in the price of one causes an increase in demand
for the other.
- 2 goods are
CHAPTER 5: ELASTICITY
1. Basic idea
- A numerical measure of the responsiveness of quantity demanded and quantity
supplied to one of its determinants. -> thay đổi của qd and qs khi một determinant
changes (độ trung thành của người tiêu dùng, độ nhạy cảm với giá)
2. Price elasticity of demand
- Measure hơ much quantity demanded responds to a change in price.
- Demand là elastic if qd responds substantially to changes in the price.
- Demand là inelastic if qd responds only slightly to changes in the price.

Price elasticity of demand = percentafe change in Qd/ percentage change in P

Percentage change in Qd= (end value – start value)/start value .100%

(lấy gttd, cgi giảm thì là âm)

Midpoint method= (end value – start value)/midpoint x 100%

 The midpoint is the number halfway between the start and end values, also the
avarage of those values.
- The price elasticity of demand measúe how willing consumers are to buy less of the
good as its price rises
- Price elss is higher when close substitutes are (ncl nếu nó ít hàng thay thế hơn thì khi mà
giá tăng, mn vẫn ph mua, nên price elas sẽ nhỏ hơn)
- Price elass is higher for narrowly defined goods than broadly defined ones.
- Price elas is higher for luxuries than for necessitites.
- Price elas is higher in the long run than in the short run. (tgian càng dài thì độ co dãn
càng lớn)
 The price elass of demand depends on
+ the extent to which close substitutes are available
+ whether the good is a necessity or a luxury
+ how broadly or narrowly the good is defined
+ the time horizon-elass is higher in the long run than in the short run

- The variety of demand curves

- Lớn hơn 1 -> elastic, D curve relatively flat
- Nhỏ hơn 1 -> inelastic, D curve relatively steep
- Bằng 1 -> unit elastic, D curve intermediate slope
- Bằng 0 -> Perfectly inelastic, d curve vertical
- Bằng infinity -> Perfectly elastic, d curve horizontal
- The slope of a linear demand curve is constant, but its elasticity is not (trên một đường
thì độ E có thay đổi)
- Elasticity nó ảnh hưởng đến total revenue (price x quantity sold)
- A price increases has 2 effect on reveenure: higher P means more revenue on each unit
you sell; bu
 - If Demand is elastic then price elas > 1 -> % change in Q > %cjamge in P -> revenue falls
(ah của lượng nhiều hơn ah của giá)
- If Demand is inelastic then price elas <1 -> %change in Q < %change in P -> revenue rises

3. Conclusion
- When demand is inelastic -> price and total revenue move in the same direction
- When demand is elastic -> price and total revenue move in the diff direction

B. Price elasticity of Supply

- Measures how much Qs responds. To a change in P (càng dễ thay đổi slg của họ khi giá thay
đổi thì họ cang co giãn)
Price elass of supply = Percentage change in Qs/ Percentage change in P
+ perfectly inelatic =0
+ inelastic <1
+ unit elastic = 1
+ elastic >1
+ perfecly elastic = ìninity