1.3.1 Choices and Costs Flashcards
1
Q
Economics
A
The Study of how humans make decisions to satisfy unlimited wants with scarce resources.
2
Q
Scarcity
A
Not enough resources to satisfy everyone’s wants at a free price
3
Q
Key Economic Assumption:
A
All humans are rational and self interested.
EVERYTHING has a cost.
4
Q
People Face Trade offs
A
In order to get something, other things have to be given up.
5
Q
Opportunity Cost
A
Opportunity cost is the value of your next best option ( the option given up)
Opportunity cost IS NOT the value of all other options, just the next best one
6
Q
Sunk Cost
A
Sunk Cost is the amount already invested which cannot be recovered.
Are you full but somebody at your table just ordered more sushi? Since its been ordered and paid for, you MUST finish it right?
NO! This is a sunk cost!
