1. Principles of Microeconomics Flashcards
What is economics?
Study of how people make decisions under conditions of scarcity
What is scarcity?
Time, money, resources
What are some resoures?
Land
Labour
Capital
What is the cost-Benefit Approach?
If the benefit of an activity exceeds its cost, do it
Benefits
Amount you are willing to pay if you had to
What is a cost
The value of the resources you must give up in order to do x
What is the Reservation price?
The price at which a consumer is indifferent about additional search for a lower price
What are soem common pitfalls in estimating costs?
The most desriable atlernative given up as the result of a decision
What is a sunk cost?
A Cost that has already been committed and cannot be recovered
e. free pizza
What are absolute dollar amounts?
Used instead of proportion to compare prices
What is the average arginal distinction?
Compare the benefits and cost of an additional unit of activity
What is marginal cost?
Increase in total cost that results from carrying out on additional unit of activity
When would you stop increasing the level of an activity?
When the marginal cost exceeds the marginal benefit
What is an economy?
- Self organizing
- Efficient
- Incentive and self interest
What are other types of markets?
Traditional
Command
Mixed
