Out of the 10 basic principles of economics which relate to unemployment?

[Sebastian]

The 10 principles are

Principle 1: People face trade-offs

Principle 2: The cost of something is what you give up to get it

Principle 3: rational people think at the margin

Principle 4: People respond to incentives

Principle 5: Trade can make everyone better off

Principle 5: Markets are usually a good way to organize economic activity

Principle 7: Government can sometimes improve market outcomes

Principle 8: A country's standard of living depends on its ability to produce goods and services

Principle 9: Price rises when the government prints too much money

Principle 10: society faces a short-run trade-off between inflation and unemployment



I have to use at least 4 of the 10. Which ones would relate to the unemployment rate being so high? or have an effect on unemployment?

This is for Macro Economics

Thank you for your help.

[ejg_dnd]

Seriously, these are sound principles of economics? I only agree with some of them. I partly disagree with principle 3, because everyone thinks on the margin. I also partly disagree with principle 8, as countries don't have standards of living and an ability to produce goods and services, only people do. I partially disagree with principle 9, purchasing power whenever money is printed and traded, it does not matter if it is too much, and it doesn't matter if government prints it. I think principle 6 and 7 are contradictory, and disagree with principle 7. I disagree with principle 10, because the whole Phillips curve "tradeoff" is illusory. Just because two statistical measures correlate does not mean that anything that will change one will change another, and the whole "short-run" idea is used to try to salvage the failed theory from the contradiction of the statistical data of the 1980s.

Still, work with what you have. First, solidify your definition of unemployment. While an economics class may only look at one unemployment rate, there are actually 6 unemployment rates, U-1 to U-6. Pick one and define it in your essay (if your class did not study the different unemployment rates, pick U-3 and define it). Read what the unemployment rates encompass here: http://portalseven.com/employment/unempl...ate_u6.jsp

Some ideas:

Look at Principle 4. Look at government programs such as social security, and show how people respond to that incentive and become unemployed. Look at principle 1 to solidify this, people may face tradeoffs between having to work and getting a wage, and not working and getting payments from the state.

Also, look at principle 3 and minimum wage. Employers will hire workers on margin. Minimum wage creates a price floor that disrupts this process, and results in the least productive workers being unemployed.

You can also look at principle 6, at how markets are a good way to organize economic activity. Look at all the ways in which laws interfere with gainful employment, through licensing, allowing unions special privilege, taxation, etc. Many of these laws will increase the cost of hiring someone to the employer, causing them to hire less people, or hiring people for a lower wage.

Hope this helps.