Chapter 3 - Benefits and Costs, Supply and Demand Flashcards
Willingness to pay
The value of a good to somebody is what that person is willing to pay for it
Marginal Willingness to Pay
the additional willingness to pay of a person for one more unit
Total Willingness to Pay
the total amount a person would be willing to pay to attain that consumption level rather than go without the good entirely.
Demand Curves
shows the quantity of a good of service that the individual in question would demand at any particular price.
Aggregate Demand Curve
is the summation of a number of individual demand curves.
Benefits
implies being made better off. The benefits that people get from something are equal to the amount they are willing to pay for
Opportunity Costs
producing something consists of the max value of other outputs we could or would have produced had we not used the resources to produce the item in question.
(include out of pocket costs)
Private Costs
the costs experience by the party making the decisions leading to that action
Social Costs
an action are all of the costs of the action no matter who experiences them. (include private costs)
Equimarginal Principle
“If you have multiple sources to produce a given product or achieve a given goal, and you want to minimize the total cost of producing a given quantity of that output, distribute production in such a way as to equalize the marginal costs between the production sources.
Supply Curve
The quantity of the good the firm would supply at different prices.
