About the Instructor
Name,Wang Hongping
Contact,wanghp3@gmail.com/13970030631
If you have any question about the course,
please mail to me,the cellphone number is
just for EMERGENCY.
About the Course
References,
,西方经济学,by 高鸿业,The worst book I
ever read,almost drive me crazy and far
away from economics
Principles of economics by Mankiw,4th ed,
The best introductory economics textbook I
know,interesting,plain,and concise.
Economics by Stiglitz&Walsh,4th edition
Economics by Samuelson,18th edition
About the Course
Main Journals,
American Economic Review
Econometrica
Journal of Economic Perspectives
Economist
Articles in the first two journals will be too
technical to you to understand,
The forth is actually a magazine with
popular topics written by journalists.
About the Course
Advanced study on economics need a lot of
mathematics on which most of you have not
been trained well.
References for further study:
Intermediate Microeconomics,a Modern
Approach by Varian,7th edition,The best
intermediate level microeconomics textbook.
微观经济十八讲，平新乔著。技术性较强。
About the Course
References for further study:
Microeconomic Theory by Mas-Colell &
Whinston & Green,The best advanced
microeconomic textbook.
Microeconomic Analysis by Varian,3th ed.
Advanced Microeconomic Theory by Jehle &
Reny
If you need exercise book on economics…
About the Course
References for further study on
Macroeconomics:
– Macroeconomics by Blanchard,4th edition.
– Macroeconomics by Mankiw,5th edition.
– Macroeconomics by Bernanke,6th edition.
– Macroeconomics by Dornbush & Fisher,10
edition,(For MBA students)
About the Course
Advanced Macroeconomics by David Romer,
3th edition,(A good bridge between
intermediate and advanced level
macroeconomics)
Recursive Macroeconomic Theory by
Ljungqvist & Sargent,2th edition,(Most
popular macro-economics textbook among
north American).
About the Rules
We think you are adult enough to make
decision on your life,Our philosophy is,
your life,your decision,your responsibility,
Class attendance is expected but not
required.
Do not cheating in homework or exam,
Any violation will be penalized.
There is no exception in grading.
Ten Principles of
Economics
经济学十大原理
Chapter 1
Outline
What is Economics
1,Classification of Economics
2,Why Study Economics
3,What is Economics
Ten Principles of Economics
1.How People Make Decisions
2.How People Interact
3.How the Economy as a Whole Works
Economics is a Social Science
combines the virtues of politics and science
Its subject matter is society
– a,How people choose to leads their lives
– b,How people interact with one another
It approaches the subject with the
dispassion of a science
Methods of science,Questions of politics
Economics tries to make progress on the
fundamental challenges that all societies
face.
Classification of Economics
In China
– 政治经济学、经济思想史、经济史、西方经济学、世界经济，人口资源与环境经济学，国民经济学、区域经济学、财政学、金融学、产业经济学、国际贸易学、
劳动经济学、统计学、数量经济学、国防经济学
In USA
– Microeconomics,macroeconomics,econometrics,
industrial organization,labor economics,finance,
public finance,international economics,development
economics,comparative economics,political
economics,law and economics,economic history.
Primary,Intermediate,Advanced
Why Study Economics
Economics is a study of mankind in the
ordinary business of life
by Alfred Marshall
Economics will help you understand the
world in which you live
Economics will make you a more astute
participant in the economy
Economics will give you a better
understanding of the potential and limits of
economic policy
Economy…
.,,The word economy comes from a Greek
word for,one who manages a household.”
A household and an economy
face many decisions:
Who will work?
What goods and how many of them
should be produced?
What resources should be used in
production? And how?
How should the goods be allocated?
Society and Scarce Resources:
The management of society’s resources is
important because resources are scarce.
Scarcity.,,means that society has limited
resources and therefore cannot produce all
the goods and services people wish to
have.
Self-interest Economic Agent
Economics looks people as rational or self-interest
economic agent.
Human’s desires are unlimited compared to
resources
,不知足诗,
终日奔波只为饥，方才一饱便思衣。
衣食两般皆具足，又想娇容美貌妻。
娶得美妻生下子，恨无田地少根基。
买得田园多广阔，出入无船少马骑。
槽头拴了骡和马，叹无官职被人欺。
县丞主薄还嫌小，又要朝中挂紫衣。
若要世人心里足，除是南柯一梦西。
Economics
Economics is the study of how
society manages its scarce
resource
Economists study.,,
How people make decisions.
How people interact with each other.
The forces and trends that affect the
economy as a whole.
HOW PEOPLE MAKE DECISIONS
People face trade-offs.
The cost of something is what you give up
to get it.
Rational people think at the margin.
People respond to incentives.
Principle #1,People Face Trade-offs.
,There is no such thing as a free lunch!”
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
Principle #1,People Face Trade-offs.
Efficiency v,Equity
– Efficiency means society gets the most that it
can from its scarce resources.
– Equity means the benefits of those resources
are distributed fairly among the members of
society.
Principle #2,The 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 obtain that item.
Principle #2,The Cost of Something
Is What You Give Up to Get It.
Basketball star
LeBron James
understands
opportunity costs and
incentives,He chose
to skip college and go
straight from high
school to the pros
where he earns
millions of dollars.
Principle #3,Rational 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.
Principle #4,People 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!
HOW PEOPLE INTERACT
Trade can make everyone better off.
Markets are usually a good way to
organize economic activity.
Governments can sometimes improve
economic outcomes.
Principle #5,Trade 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.
Principle #6,Markets Are Usually a Good
Way to Organize Economic Activity.
A market economy is an economy that
allocates resources through the
decentralized decisions of many firms and
households as they interact in markets for
goods and services.
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.”
Because households and firms look at prices
when deciding what to buy and sell,they
unknowingly take into account the social costs
of their actions.
As a result,prices guide decision makers to
reach outcomes that tend to maximize the
welfare of society as a whole.
Principle #6,Markets Are Usually a Good
Way to Organize Economic Activity.
Principle #7,Governments Can
Sometimes Improve Market Outcomes.
Markets work only if property rights are
enforced.
Property rights are the ability of an individual to
own and exercise control over a scarce resource
Market failure occurs when the market fails to
allocate resources efficiently.
When the market fails (breaks down)
government can intervene to promote efficiency
and equity.
Principle #7,Governments Can
Sometimes Improve Market Outcomes.
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.
– market power,which is the ability of a single
person or firm to unduly influence market
prices,
HOW THE ECONOMY AS A
WHOLE WORKS
A country’s standard of living depends on
its ability to produce goods and services.
Prices rise when the government prints
too much money.
Society faces a short-run trade-off between
inflation and unemployment.
Principle #8,A Country’s Standard of Living Depends
on Its Ability to Produce Goods and Services.
Standard of living may be measured in different
ways:
– By comparing personal incomes.
– By comparing the total market value of a nation’s
production.
Almost all variations in living standards are
explained by differences in countries’
productivities.
Productivity is the amount of goods and services
produced from each hour of a worker’s time.
Principle #9,Prices Rise When the
Government Prints Too Much Money.
Inflation is an increase in the overall level
of prices in the economy.
One cause of inflation is the growth in the
quantity of money.
When the government creates large
quantities of money,the value of the
money falls.
Principle #10,Society Faces a Short-run Trade-
off between Inflation and Unemployment.
The Phillips Curve illustrates the trade-off
between inflation and unemployment:
– Inflation or Unemployment
– It’s a short-run trade-off!
The trade-off plays a key role in the
analysis of the business cycle—
fluctuations in economic activity,such as
employment and production
Summary
The principles of personal decision
making are:
People face trade-offs.
The cost of something is what you give up
to get it,
Rational people think at the margin.
People respond to incentives,
Summary
The principles of economic interaction are:
Trade can make everyone better off.
Markets are usually a good way to
organize economic activity,
Governments can sometimes improve
market outcomes.
Summary
The principles of the economy as a whole
are:
A country’s standard of living depends on
its ability to produce goods and services.
Prices rise when the government prints
too much money,
Society faces a short-run trade-off between
inflation and unemployment.
Name,Wang Hongping
Contact,wanghp3@gmail.com/13970030631
If you have any question about the course,
please mail to me,the cellphone number is
just for EMERGENCY.
About the Course
References,
,西方经济学,by 高鸿业,The worst book I
ever read,almost drive me crazy and far
away from economics
Principles of economics by Mankiw,4th ed,
The best introductory economics textbook I
know,interesting,plain,and concise.
Economics by Stiglitz&Walsh,4th edition
Economics by Samuelson,18th edition
About the Course
Main Journals,
American Economic Review
Econometrica
Journal of Economic Perspectives
Economist
Articles in the first two journals will be too
technical to you to understand,
The forth is actually a magazine with
popular topics written by journalists.
About the Course
Advanced study on economics need a lot of
mathematics on which most of you have not
been trained well.
References for further study:
Intermediate Microeconomics,a Modern
Approach by Varian,7th edition,The best
intermediate level microeconomics textbook.
微观经济十八讲，平新乔著。技术性较强。
About the Course
References for further study:
Microeconomic Theory by Mas-Colell &
Whinston & Green,The best advanced
microeconomic textbook.
Microeconomic Analysis by Varian,3th ed.
Advanced Microeconomic Theory by Jehle &
Reny
If you need exercise book on economics…
About the Course
References for further study on
Macroeconomics:
– Macroeconomics by Blanchard,4th edition.
– Macroeconomics by Mankiw,5th edition.
– Macroeconomics by Bernanke,6th edition.
– Macroeconomics by Dornbush & Fisher,10
edition,(For MBA students)
About the Course
Advanced Macroeconomics by David Romer,
3th edition,(A good bridge between
intermediate and advanced level
macroeconomics)
Recursive Macroeconomic Theory by
Ljungqvist & Sargent,2th edition,(Most
popular macro-economics textbook among
north American).
About the Rules
We think you are adult enough to make
decision on your life,Our philosophy is,
your life,your decision,your responsibility,
Class attendance is expected but not
required.
Do not cheating in homework or exam,
Any violation will be penalized.
There is no exception in grading.
Ten Principles of
Economics
经济学十大原理
Chapter 1
Outline
What is Economics
1,Classification of Economics
2,Why Study Economics
3,What is Economics
Ten Principles of Economics
1.How People Make Decisions
2.How People Interact
3.How the Economy as a Whole Works
Economics is a Social Science
combines the virtues of politics and science
Its subject matter is society
– a,How people choose to leads their lives
– b,How people interact with one another
It approaches the subject with the
dispassion of a science
Methods of science,Questions of politics
Economics tries to make progress on the
fundamental challenges that all societies
face.
Classification of Economics
In China
– 政治经济学、经济思想史、经济史、西方经济学、世界经济，人口资源与环境经济学，国民经济学、区域经济学、财政学、金融学、产业经济学、国际贸易学、
劳动经济学、统计学、数量经济学、国防经济学
In USA
– Microeconomics,macroeconomics,econometrics,
industrial organization,labor economics,finance,
public finance,international economics,development
economics,comparative economics,political
economics,law and economics,economic history.
Primary,Intermediate,Advanced
Why Study Economics
Economics is a study of mankind in the
ordinary business of life
by Alfred Marshall
Economics will help you understand the
world in which you live
Economics will make you a more astute
participant in the economy
Economics will give you a better
understanding of the potential and limits of
economic policy
Economy…
.,,The word economy comes from a Greek
word for,one who manages a household.”
A household and an economy
face many decisions:
Who will work?
What goods and how many of them
should be produced?
What resources should be used in
production? And how?
How should the goods be allocated?
Society and Scarce Resources:
The management of society’s resources is
important because resources are scarce.
Scarcity.,,means that society has limited
resources and therefore cannot produce all
the goods and services people wish to
have.
Self-interest Economic Agent
Economics looks people as rational or self-interest
economic agent.
Human’s desires are unlimited compared to
resources
,不知足诗,
终日奔波只为饥，方才一饱便思衣。
衣食两般皆具足，又想娇容美貌妻。
娶得美妻生下子，恨无田地少根基。
买得田园多广阔，出入无船少马骑。
槽头拴了骡和马，叹无官职被人欺。
县丞主薄还嫌小，又要朝中挂紫衣。
若要世人心里足，除是南柯一梦西。
Economics
Economics is the study of how
society manages its scarce
resource
Economists study.,,
How people make decisions.
How people interact with each other.
The forces and trends that affect the
economy as a whole.
HOW PEOPLE MAKE DECISIONS
People face trade-offs.
The cost of something is what you give up
to get it.
Rational people think at the margin.
People respond to incentives.
Principle #1,People Face Trade-offs.
,There is no such thing as a free lunch!”
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
Principle #1,People Face Trade-offs.
Efficiency v,Equity
– Efficiency means society gets the most that it
can from its scarce resources.
– Equity means the benefits of those resources
are distributed fairly among the members of
society.
Principle #2,The 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 obtain that item.
Principle #2,The Cost of Something
Is What You Give Up to Get It.
Basketball star
LeBron James
understands
opportunity costs and
incentives,He chose
to skip college and go
straight from high
school to the pros
where he earns
millions of dollars.
Principle #3,Rational 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.
Principle #4,People 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!
HOW PEOPLE INTERACT
Trade can make everyone better off.
Markets are usually a good way to
organize economic activity.
Governments can sometimes improve
economic outcomes.
Principle #5,Trade 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.
Principle #6,Markets Are Usually a Good
Way to Organize Economic Activity.
A market economy is an economy that
allocates resources through the
decentralized decisions of many firms and
households as they interact in markets for
goods and services.
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.”
Because households and firms look at prices
when deciding what to buy and sell,they
unknowingly take into account the social costs
of their actions.
As a result,prices guide decision makers to
reach outcomes that tend to maximize the
welfare of society as a whole.
Principle #6,Markets Are Usually a Good
Way to Organize Economic Activity.
Principle #7,Governments Can
Sometimes Improve Market Outcomes.
Markets work only if property rights are
enforced.
Property rights are the ability of an individual to
own and exercise control over a scarce resource
Market failure occurs when the market fails to
allocate resources efficiently.
When the market fails (breaks down)
government can intervene to promote efficiency
and equity.
Principle #7,Governments Can
Sometimes Improve Market Outcomes.
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.
– market power,which is the ability of a single
person or firm to unduly influence market
prices,
HOW THE ECONOMY AS A
WHOLE WORKS
A country’s standard of living depends on
its ability to produce goods and services.
Prices rise when the government prints
too much money.
Society faces a short-run trade-off between
inflation and unemployment.
Principle #8,A Country’s Standard of Living Depends
on Its Ability to Produce Goods and Services.
Standard of living may be measured in different
ways:
– By comparing personal incomes.
– By comparing the total market value of a nation’s
production.
Almost all variations in living standards are
explained by differences in countries’
productivities.
Productivity is the amount of goods and services
produced from each hour of a worker’s time.
Principle #9,Prices Rise When the
Government Prints Too Much Money.
Inflation is an increase in the overall level
of prices in the economy.
One cause of inflation is the growth in the
quantity of money.
When the government creates large
quantities of money,the value of the
money falls.
Principle #10,Society Faces a Short-run Trade-
off between Inflation and Unemployment.
The Phillips Curve illustrates the trade-off
between inflation and unemployment:
– Inflation or Unemployment
– It’s a short-run trade-off!
The trade-off plays a key role in the
analysis of the business cycle—
fluctuations in economic activity,such as
employment and production
Summary
The principles of personal decision
making are:
People face trade-offs.
The cost of something is what you give up
to get it,
Rational people think at the margin.
People respond to incentives,
Summary
The principles of economic interaction are:
Trade can make everyone better off.
Markets are usually a good way to
organize economic activity,
Governments can sometimes improve
market outcomes.
Summary
The principles of the economy as a whole
are:
A country’s standard of living depends on
its ability to produce goods and services.
Prices rise when the government prints
too much money,
Society faces a short-run trade-off between
inflation and unemployment.
