Wednesday, July 23, 2008

cross-seciton graphs, wants and limited resources

Another form of graph is cross-section graphs. Cross-section graphs have the advantage of simplicity. You can gather the information quickly by just looking at a cross-section graph. It is usually composed of cross-bars, however, you can use lines or dots instead of bars. There are several different relationships between two variables. They can be inverse relationship, positive relationship, or no relationship.

As mentioned before, economic issues arise when the limited resources do not meet our daily requirements. Economy allows us to find the most effective way to utilize our resources. Limited resources include: labour, land, capital and entrepreneurships. Labour is the work one can do to produce goods and services. Land is what we have for granted, such as air, water and mineral underneath. Capital is the projects that we produce to simplify the production of our goods and services, such as dams, and highways. Human capital is also a kind of capital, they are the knowledge that we possess to do things more effectively and smart. Our wants are unlimited, if we want to have an easier and better life, we have to improve ourselves and make our limited resources catch up with our soaring wants!!

Tuesday, July 22, 2008


Explore in the world of economics!!

Monday, July 21, 2008

Time-Series Graphs

Time-series graphs are a kind of graph where the x-axis is a measure of time, and the y-axis is the desirable variable. Time-series graphs reveal the changes of the variable according the change of time. It emphasizes some sort of trend, which means the tendency of rise or fall. Time-series graphs are easy to get information.

Friday, July 18, 2008


A lot of data and information are conveyed by graphs. It is a great idea to handle the usage of graphs in order to study economics well.

Graphs are consisted with two axes, y-axes and x-axes. The intersection point is called the origin where the values are set to zero. The quantities are showed on the graphs by distances from the origin. With a series of dots with different x and y coordinates, we may find the relationship between the two variables. There are three basic kind of diagrams: scatter diagrams, time-series graphs and cross-section graphs

Scatter diagram is used to determine if a relationship exists between two variables and what kind of relationship that is. For example, the price of clothes and the consumption of clothes should be inversely proportional to each other (probably). That is when the price of clothes rises, the consumption of clothes should rise. Although there may be a correlation between these two variables, however, we can not determine if there is a causation relationship between them. The information we get from the graphs is limited and we can not assume unproved things.

It is important that you read the graph carefully, both the break and the scale. A graph can mislead you if you don’t interpret the graph correctly. A lot of businesses try to stretch or compress the scale of axes in order to get visual misleading.
Learn more about graphs will only benefit your future study of economics.

Thursday, July 17, 2008

So what is exactly microeconomics and macroeconomics?

Microeconomics: “is the study of the decisions of individual people and businesses.”

Macroeconomics: “is the study of the national economy and the global economy.”

Microeconomics tries to explain how the taxes affect the prices and quantities of individual goods and services. Macroeconomics studies how government regulation affects the whole market as a whole, such as income, jobs and so on...

Economic Science

Like a laboratory for chemist, economists can build models and test the experiment in order to predict the economy accurately. There are three steps involved: Observation, model build-up, testing models. However, different from a laboratory, you can not separate out one factor and keep the other unchanged. What economists do is to compare two things where there is one factor different and seek out the effects of the factor.

Sometimes we make a wrong conclusion due to some common “fallacies”.

The first is you can’t make what is correct for parts also correct for the whole and vice verse. Another is you can not conclude causes and effects according to the time. A lot of things economists are controversial on. However, on some of the issues, they will agree with each other. For example, the effect of taxes, and the way to reach welfare...

Wednesday, July 16, 2008

Inflation, Living Stantard, market failure and solutions

When you work, you get payments, and the boss get services from you which value will be at least as much as the wage. So everyone get something form the voluntary exchange. When the market is efficient, we use our resources where they are valued most. When the market is not effective, it will usually adjust itself or the government will give orders to change the economy. Government force is required when market failure happens. Market failure arises when a company control the market and limit the goods produced in order to bring in a great profit.
Market failure also arises when nobody wants to pay for public utilities, such as road. Then government collects tax to build the road.

It is important for each of us to work hard in order to increase the productivity of the country. This will only improves our living standards and brings welfare to the world.

It is not right to say the more money we have, the better the life standard is. If only prices rise, we will face inflation. Only productivity increases, living standards can improve!!

Tuesday, July 15, 2008

Margins and Incentives

We make choices at the margin. Incentive influences choices. Incentive is the inducement of taking a specific action.
People weigh the marginal cost and marginal benefit when they make a choice. For example, suppose you work three days a week and now you want to make it four days. However, you have to give up an extra day to hang out with your friends. The marginal cost of working three days is the day that you will not hang out with your friends. The marginal benefit is the pay you get from the extra day.
Assume the wage rises while everything else stays the same, and then the marginal benefit of working an extra day will increase. However, the opportunity cost of hanging out with your friend increases as well.

The market is changing all the time, so it is important for you to make the right choice!!