Thinking like an economist Flashcards
What is scarce and what does it mean
Resources, time etc
limited amount
what are choices
have to make a certain choice within a scarce world
Criticisms of economic analysis
holding things constant , lack of external validity , wrong measure of societal wellbeing
what are good economicst good at understanding?
economics models are not universal
what is a positive question.
has a definitive answer can be tested
what is a normative judgement
no definitive answer involves value judgments
How to make choices ?
look at the benefits and costs
benefit and costs equation?
Where B(x)> C(x) choose the benefit from its greater than the costs of action x
how to work out net marginal gain?
NMG= MB-MC
when should you consume something with marginal approach
when NMG> 0
How to work out Net gain ?
NG(n) = NG(n-1) + MGN (n)
n= number of something
what is the opportunity cost
the next best alternative forgone and will be in the cost and benefit analysis
what are the costs you can’t recover if you have already paid ?
sunk costs
how to work out average benefit ?
AB(t) = B(t) / number of consumer which is t
How to work out average cost
total cost / how much you consume or have
