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Principles of econ
Econ Cpt. 1
| Term | Definition |
|---|---|
| cost-benefits principle | If the cost is at least equal to the benefit, you should do it |
| willingness to pay | The maximum price someone is willing to pay for a good or service (expected benefit) |
| marginal cost | The extra benefit you gain from doing something |
| economic surplus | The difference between expected benefit and expected cost |
| willingness to accept | The minimum a seller is willing to sell their product for (cost of making) |
| opportunity cost principle | Viewing choices by what the next best option is |
| opportunity cost | The value of the next best alternative (not always money) |
| sunk cost | The time or money already invested in something |
| marginal principle | Break "how many" decisions down into "either or" decisions |
| the rational rule | If something is worth doing, keep doing it until your marginal benefit equals your marginal cost |
| marginal cost | The extra cost you gain from doing something |
| interdependence principle | the best choice depends on your choice, other people's choices, the market, and future expectations |
| positive statement | A statement of fact that is provable |
| normative statement | A statement of opinion that cannot be disproven. Should have facts to back it up |
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