term1 Flashcards

1
Q

what is Cost benefit principle

A

comparing the cost of an item say coffee. If you value the benefit of the item as higher or the same as the cost.

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2
Q

what is economic surplus

A

total benefit minus the total cost

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3
Q

what is opportunity cost principle

A

the cost is the next best alternative that you have to give up

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4
Q

what is sunk cost

A

a cost that has been incurred and cannot be reversed

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5
Q

what is the pff

A

production possibility frontier. and illustrates trade offs when allocating recourses

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6
Q

what is the marginal principle

A

decisions are best made incrementally.

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7
Q

what is marginal benefit and cost

A

the extra benefit or cot from one extra unit

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8
Q

what is rational rule?

A

if something is worth doing it keep doing it till marginal benefit equals marginal cost.

Following this rule leads to good decisions

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9
Q

what is interdependence principle

A

your best choice might change due to what is happening in the world

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10
Q

what is the demand curve

A

shows the quantity of an item that someone plans to buy at each price

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11
Q

what is law of demand

A

quantity demanded is higher when the price is lower.

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12
Q

what is diminishing marginal benefit

A

each additional item yields smaller marginal benefit

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13
Q

when do you shift the demand curve and when do you move along the demand curve

A

A shift of the demand curve is causes by an increase or decrease in demand .

Movement along the demand curve is due to a change in price or quantity

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14
Q

what are the factors that shift demand curve?

A

Incomes, price of related goods(complements and substitutes) , preferences, expectations and number of buyers

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15
Q

what are network effects

A

The effect that occurs when a good becomes more useful because other people use it. ▪ If more people buy such a good, your demand for it will also increase

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16
Q

what are congestion effects?

A

Congestion effect: The effect that occurs when a good becomes less valuable because other people use it. If more people buy such a product, your demand for it will decrease.

17
Q

what is a supply curve

A

an individual graph plotting the quantity of an item that business plans to sell at each price

18
Q

what is law of supply

A

supply curve if each item brings a higher price selling more would bring more profit. This causes an upward sloping curve

19
Q
A