Chapter 1 Flashcards
Social Gain
Total Value - Total Cost
Marginal Gain
The cost to produce one unit of something
Economics
The discipline that studies how efficient decisions are made
Efficient Decisions
Choosing the most valuable alternative
Theory of Reveal Preference
Our Choices reveal our vaules
Characteristics of Value
- Value depends on the situation
- Value is different for different people
- Subsequent units of the same good have less value
Optimal Arrangement Principle
We choose the best first, second best second, etc.
No Free Lunch Principle
Every decision involves costs
Scarcity
We always have more wants than our resources can supply
Marginal Value
The value of the INDIVIDUAL UNITS of something
Marginal Analysis
We consume each unit for which the marginal value is at as great as the marginal cost
Demand
The relationship between possible prices of something and the quantities people are willing to buy
Supply
Relationship between the possible prices of something and the quantities people are willing to sell
Equilibrium Price
Consumers can buy all they want;
Producers can produce all they want
Consumer Gain
Total Value - Total Amount Paid
