Week 1 - Economic Fundamentals & Why We Trade Flashcards
1
Q
4 core principles
A
- Cost benefit — consider costs and benefits of a choice
- Opportunity cost — consider alternatives
- Marginal — whether little more/less of smth would be an improvement
- Interdependence — how diff decisions depend on each other
2
Q
Framing effects
A
Small differences in how alternatives are framed can lead ppl to make diff choices
3
Q
Rational rule
A
If smth is worth doing, keep doing it until MB=MC
4
Q
Interdependency types
A
- Between Individual choices
- Between ppl/businesses in same market
- Between markets
- Through time
5
Q
3 important roles of prices
A
- Message
- Incentive
- Aggregates info
6
Q
Internal markets
A
Markets within a company to buy + sell scarce resources
7
Q
Knowledge problem
A
Knowledge needed to make a good decision not available to decision maker
