EC-0005 Chapter Notes - Chapter 3: Marginalism, Procrastination, Marginal Cost
30 Jan 2018
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Document Summary
Behavioral economics - jointly analyzes the economic and psychological factors that explain human behavior: several special situations are associated with behavior that is not optimal, for example, when people have self-control problems, procrastination or addiction. Optimum - the best feasible choice; the optimal choice. Optimization using total value has 3 steps: translate all costs and benefits into common units, like dollars per month, calculate the total net benefit of each alternative, pick the alternative with the highest net benefit. Marginal cost - the extra cost generated by moving from one feasible alternative to the next feasible alternative. The principle of optimization at the margin - states than an optimal feasible alternative has the property that moving to it makes you better off and moving away from it makes you worse off.
