UNIVERSIDAD NACIONAL DE SAN CRISTBAL DE

HUAMANGA
SECCION DE POST GRADO
MAESTRA EN CIENCIAS DE LA INGENIERA CON MENCIN
EN GERENCIA DE PROYECTOS Y MEDIO AMBIENTE

PRINCIPLES OF ECONOMY

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Ph.Dr (C) MANUEL CCASANI SIERRA

Lima Octubre 2015

mcsecocivil16@gmail.co
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 What is the economy ?
Economics is the study of how society
manages its scarce resources, how people
make decisions to buy invest their savings

Ph.D(c). MANUEL CCASANI SIERRA

The economy is governed by ten
principles that analyze how
individuals make decisions, how
individuals and the functioning
of the economy whole interact.

Ph.D(c). MANUEL CCASANI SIERRA

WHAT ARE THE PRINCIPLES OF THE ECONOMY ?
The economy is regulated by ten principles :
First principle: Individuals face tradeoffs

To get what something we like, make decisions

must Choose between two or more goods.
Society faces a tradeoff between efficiency and
equity.
Efficiency means that society is making the most
out of their limited resources. Equity means is
distributing their benefits of those resources
among its members.

Ph.D(c). MANUEL CCASANI SIERRA

other activity

Second principle: The opportunity cost

When individuals face tradeoffs , making
decisions
should compare the costs and benefits of various
possible courses of action .
When we make a decision as to study at
university, other activity.

Ph.D(c). MANUEL CCASANI SIERRA

Third principle : Rational people think at the
margin

In many situations, individuals make the best

possible decisions thinking at the margin.
A person takes a rational decision if and only if the
marginal benefit exceeds marginal cost.
Economists call marginal changes.

Ph.D(c). MANUEL CCASANI SIERRA

Fourth principle: Individuals respond to incen
Individuals make decisions by comparing costs
and
benefits, their behavior will change when the costs
or
benefits change.The fundamental role of
incentives in
determining behavior is important for the
measures to be
taken by the public authorities.

Ph.D(c). MANUEL CCASANI SIERRA

Fifth principle: Trade can improve the welfare of
everyone

Trade allows each person to specialize in activities b

done either cultivate the field , sew or build houses
Trading with other people , you can buy a greater v
of goods and services at lower cost.
Trade allows countries to specialize in what they do
best and enjoy a wider variety of goods and service

Ph.D(c). MANUEL CCASANI SIERRA

Sixth principle : Markets normally

In a market economy , the decisions of the central

planner are replaced by decisions of millions of
businesses and households.

Ph.D(c). MANUEL CCASANI SIERRA

Seventh principle: The state can sometimes
improve
market outcomes
hough markets are often a good way to organize
onomic activity , this rule has some important
ceptions. There are two major reasons why the state
ervenes in the economy: to promote efficiency and
uity. That is, most of the measures aim to increase
e economic pie or to change the way it is distributed

Ph.D(c). MANUEL CCASANI SIERRA

country
depends on its ability to produce goods and
services
Almost all the differences between living standard
attributable to differences between the levels of
productivity of countries . In countries where work
can produce a lot of goods and services per unit ti
most people enjoy a high standard of living ; in c
whose workers are less productive , most people le
precarious existence..

Ph.D(c). MANUEL CCASANI SIERRA

Ninth principle: Prices rise when the government pr
too much money
When a government creates
large amounts of money , its
value decreases. In Germany ,
in the early 20s when prices
tripled , on average , every
month , the amount of money
also tripled .

When prices rise economy is

called
inflation. , The same is due to
the growth of the amount of
money circulating .
Ph.D(c). MANUEL CCASANI SIERRA
Tenth principle: Society faces a short-run tradeoff
between inflation and unemployment
Specialists economy are
struggling to rid the
economy of inflation. It is
thought that reducing
inflation causes a
temporary increase in
unemployment. This
trade-off or exchange
between inflation and
unemployment is called "
Phillips curve " .

Ph.D(c). MANUEL CCASANI SIERRA

 S O
O U !
Y !! !
N K H
A U C
H
T M

Ph.D(c). MANUEL CCASANI SIERRA 14