AREC 202 Lecture Notes - Lecture 4: Marginal Cost, Comparative Advantage, Complementary Good
5 Oct 2017
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Take action if and only if bene ts exceeds costs or if are equivalent. Not just money includes intangible things or other things that may be sacri ced. X= hurts decision to order text book. Hurts decided to buy the ebook cause the cost and bene ts were about equal. Economic surplus: value you walk away from transaction with. Total bene ts + total costs= economic surplus. Ex 1. 2: your going to buy alarm clock from bookstore but you know walmart has if for . If costs exceed to go to walmart then its not worth it. Applying cost bene t principle: assume people are rational. People who have well de ned goals and try to ful ll them as best as possible. Ex 1. 3: you lost that you planned to spend on a ticket. Its very irrational to go see the play because you just lost money and you shouldn"t pay double to see it.
