Mankiw's Principles of Microeconomics Chapter 1

1.  What in this chapter made you think about an economic concept differently than your previous beliefs?  

Seeing as I completed Macroeconomicics last semester my previous beliefs were in fact molded by that prior experience. In looking back and reflecting on my opinions during the first couple of weeks last semester, many of Mankiw’s principles are common sense in today’s society. Economics is about scarcity of resources and it tries to make sense of how our society manages those resources effectively and efficiently so that we can minimize our opportunity costs. 

A topic that most online students struggle with today is the opportunity cost of going back to school. Frankly, we ask ourselves if it’s worth it. In Mankiw’s book, he uses an example of a full time student gauging the opportunity costs of going back to school. Mankiw explains what that student is losing in order to obtain a degree. In his example, he points out that opportunity costs don’t just include the monetary costs associated with school, one must also consider the income that’s not generated because of this. 

While most decent paying jobs today require a degree, when researching a career field most of us will rationalize the opportunity costs involved. In some career fields, the cost of the degree may outweigh the monetary benefits of it. In which case, a student may decide the degree is not worth it and take his/her chances on working in the career field without it. While that may make sense in the short term, on a long term basis that student is losing the marketability they may have had if they had pursued a degree. In my opinion, we’re seeing this issue contribute to the unemployment rate today. During the economic boom of 2001-2006, those who chose to make short term decisions while not taking into consideration the long term opportunity costs may now be facing competition in the job market they are not adequately prepared for.

2. What new questions do you have now about the US economy based on this chapter?

Considering we’re in middle of an election year, we can’t help but be reminded on a daily basis of the importance of income equality in our society. Mankiw’s first principle, People Face Trade-offs, elaborates on this very point. 

When it comes to the topic of income equality and it’s relation to growth, most of us will readily agree that it’s human nature to have aspirations of a comfortable standard of living. Where this agreement usually varies, however, is on the question of how households achieve an optimal standard of living, and what exactly should be our government’s role in helping us achieve these goals. Some are convinced that our government should be responsible for setting laws, supporting the welfare its citizens, and defending the homeland, while others maintain that less government is more beneficial for the overall free market, and that growth decreases scarcity which puts downward pressure on price. 

In the upcoming election it will be interesting to see what our county values the most. Will the country rally around the message of income equality and equal benefits for all, or will free market capitalistic views prevail.