RMI-2302 Lecture Notes - Lecture 4: Sunk Costs, Marginal Utility, Marginal Cost
14 Feb 2016
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Rmi 2302 exam 1 study guide. Individual decision making thinking like an economist. Economists don"t assume people make calculations explicitly. Common pitfalls in decision making does often differ from the predictions of economic models. (even if models don"t always predict how we do behave, they may often give us useful insights into how to achieve our goals more efficiently. ) Ignoring implicit costs - if doing activity x means not being able to do activity y, the value of doing opportunity y is an opportunity cost of doing x. Failing to ignore sunk costs - sunk costs may seem relevant, but in reality they"re not and should be ignored: interest and insurance are sunk costs. Measuring costs and benefits as proportions rather than absolute dollar amounts. The invisible hand important insight of economic analysis. The individual pursuit of self-interest is often not only consistent with broader social objectives, but actually even required by them.
