<data: post.body />The Ten Principles of Economicsa. Society Facing Trade Off.The
economic resources underlying the fulfillment of the needs and desires
of the community are rare, therefore to obtain something that is needed
someone must sacrifice something else. This is corroborated by the saying 'there is no free lunch'. Trade off is the first lesson in the decision making process.b. Cost Is What You Sacrifice To Get SomethingThe true cost of goods and services is what you sacrifice to get it. This cost includes all direct and indirect costs. For that in making decisions, one should always compare the costs and benefits of each chosen action.c. The principle of marginalityThe rational person always thinks gradually. Many decisions in life that require small adjustments gradually in the process of implementation. Economists term it a marginal change. In many situations, we will be able to make the best decision if we want to think in stages (Mankiw, 2000). The
principle of marginality states that a rational decision-maker will
only take action if and only if the marginal benefit of the decision is
greater than its marginal cost. The principle of marginality is widely used by farmers when making decisions to adopt a particular innovation.d. Society reacts to incentives.Because we always make decisions based on the comparison between cost
and benefits, then our behavior will change every calculation of costs
and benefits are changed.e. Profitable Trade All PartiesEvery economic unit will benefit from trade. Through
trade all parties will have the opportunity to specialize in their most
dominant fields so that the output of productive activities is done
more optimally. You can observe the application of this fifth economic principle in everyday life.
f. The Market Economy Is The Most Efficient System To Organize Economic ActivitiesIn his book, published in 1776, The Wealth of Nations, Adam Smith formulated his observations which later became a pillar of mainstream thinking in economics. Smith formulates all households and firms interact in the order in an orderly manner as guided by the invisible force he calls the invisible hand. The so-called invisible hand by Smith is actually a market price mechanism. Price reflects the value of a good for the community and the cost that society must pay to produce it.g. Government Economic Policy Aimed To Correct Market FailureMarket failure is a situation in which markets fail to allocate relatively scarce resources efficiently. One of the causes of market failure is the externality of the impact of one party's actions on the condition of the other.h. Living Community Standards Depend on ProductivityThe difference in standard of living between one country and another in the world is very significant.i. Price Level Affected By Monetary PolicyInflation is an increase in the overall price level in an economy. Some causes of inflation include the growth of the quantity of money circulating in the community.j. Society Facing Trade Off Between Inflation And Short Term Unemployment.If inflation and its causes are known, why in the implementation of the Government often have difficulty in reducing inflation. One of the reasons for the difficulty of the Government is to reduce inflation caused by efforts to curb inflation often leads to an increase in unemployment. Inflation is usually suppressed through a reduction in the quantity of money. If money decreases, investment and production funds shrink.(PEP Module, 2011)<data: post.body />
f. The Market Economy Is The Most Efficient System To Organize Economic ActivitiesIn his book, published in 1776, The Wealth of Nations, Adam Smith formulated his observations which later became a pillar of mainstream thinking in economics. Smith formulates all households and firms interact in the order in an orderly manner as guided by the invisible force he calls the invisible hand. The so-called invisible hand by Smith is actually a market price mechanism. Price reflects the value of a good for the community and the cost that society must pay to produce it.g. Government Economic Policy Aimed To Correct Market FailureMarket failure is a situation in which markets fail to allocate relatively scarce resources efficiently. One of the causes of market failure is the externality of the impact of one party's actions on the condition of the other.h. Living Community Standards Depend on ProductivityThe difference in standard of living between one country and another in the world is very significant.i. Price Level Affected By Monetary PolicyInflation is an increase in the overall price level in an economy. Some causes of inflation include the growth of the quantity of money circulating in the community.j. Society Facing Trade Off Between Inflation And Short Term Unemployment.If inflation and its causes are known, why in the implementation of the Government often have difficulty in reducing inflation. One of the reasons for the difficulty of the Government is to reduce inflation caused by efforts to curb inflation often leads to an increase in unemployment. Inflation is usually suppressed through a reduction in the quantity of money. If money decreases, investment and production funds shrink.(PEP Module, 2011)<data: post.body />
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