Chapter 3 Flashcards
What is optimisation in levels?
Optimisation in levels calculates the total net benefit of different alternatives, and then chooses the best alternative.
What is optimisation in differences?
Optimisation in differences calculates the change in the net benefits when a person switches from one alternative to another and then uses the marginal comparison to choose the best alternative.
What is behavioural economics?
Behavioural economics jointly analyses the economic and psychological fators that explain human behaviour.
What is an optimum?
An optimum is the best feasible choice. In other words, the optimum is the optimal choice.
What is comparative statics?
Comparative statics is the comparison of economic outcomes before and after some economic variable has changed.
What is a marginal analysis?
A marginal analysis is a cost benefit calculation that studies the difference between a feasible alternative and and the next feasible alternative.
What is marginal cost?
Marginal cost is the extra cost that is generated by moving from one feasible alternative to the next feasible alternative.
What does the principle of optimisation at the margin state?
The principle of optimisation states that an optimal feasible alternative has the property that moving to it makes you better off and moving away from it makes you worse off.
