Week 1 - Intro to Economics Flashcards
What is economics?
The study of how choices are made under conditions of scarcity.
Scarcity Principle
People have unlimited wants but there are limited resources meaning trade-offs need to be made.
Cost-benefit principle
An action should only be taken if the benefits outweigh the costs.
Economic surplus
Difference between the benefit and cost of an action.
Action should only be taken if economic surplus is positive.
Accounting cost
The monetary cost of something
Opportunity cost
The cost of the next best action that was not taken when making a decision.
Economic cost
The combination of accounting cost and economic cost
Skunk cost
A cost that cannot be recovered at the moment a decision is made.
Should be ignored when making decisions.
Marginal cost/benefit
The cost/benefit of repeating an action once more.
