question
We can measure value in dollar terms, but we do not really value "dollars"
what is the only reason we do?
what is the only reason we do?
answer
We only value dollars because of the stuff we can exchange them for
question
Value of something to an individual
answer
Is the most that individual is willing to sacrifice to obtain that something. OR, if the individual owns that something, its value is the least the individual is willing to accept in exchange for that something...
question
A method to measure value...
answer
1. Did it deliver?
2. is it up to my standards?
3. Is it worth the price?
2. is it up to my standards?
3. Is it worth the price?
question
optimal arrangement principle
answer
The idea that we first choose the best, then the second best, and so on
question
characteristics of value + A third characteristics of value
answer
- value depends on the situation
-value is different for different people
+
-Third characteristics of value
-subsequent units of the same good have less value
-value is different for different people
+
-Third characteristics of value
-subsequent units of the same good have less value
question
Theory of Revealed Preference
answer
our choices reveal our values
question
Value/Benefit
answer
Q: What is the value?
A: Should be #'s useful for all decision making
*Formulating answers
-what is the value of each?
-what is the price of each?
-what is the cost of each?
-what is the most yo would pay for each?
A: Should be #'s useful for all decision making
*Formulating answers
-what is the value of each?
-what is the price of each?
-what is the cost of each?
-what is the most yo would pay for each?
question
Efficient decisions
answer
-involve choosing the most valuable alternative
-are analyzed through the economic way of thinking
-are analyzed through the economic way of thinking
question
Economics
answer
-is the discipline that studies how efficient decisions are made.
question
Marginal analysis
answer
we consume each unit for which the marginal value is at least as great as marginal cost
question
Marginal value
answer
Is the value of the individual units of that something
question
marginal decisions
answer
Much of the time we do not choose all or nothing
-to eat pizza or not
-to study or not
We choose how much of something to do.
-how much pizza to eat
-how much time to devote to study
-to eat pizza or not
-to study or not
We choose how much of something to do.
-how much pizza to eat
-how much time to devote to study
question
Scarcity
answer
we have more wants than our resources can satisfy
question
Macroeconomics
answer
The study of entire economies, using concepts like total output, the unemployment rate, the national debt, total investment- is so large that sometimes it is easier to try to hide the fact there are costs.
question
No free lunch principle
answer
since any decision has at least two alternatives, choosing an alternative means that one must sacrifice at least one other alternative. That is, and decision involves costs.
every decision will involve forgoing value.
every decision will involve forgoing value.
question
Cost
answer
-Is the value of THE BEST alternative which is sacrificed when a decision is made
-cost is NOT the sum of values of all of the things you could possibly do, because you cannot do all of them
-costs may or may not involve spending money.
-cost is NOT the sum of values of all of the things you could possibly do, because you cannot do all of them
-costs may or may not involve spending money.
question
equilibrium price
answer
Consumers can buy all they want and, at the same time, firms can sell all they want.
question
Putting Supply and Demand Together
answer
-It is crucial to realize that this section uses value & cost in specific ways.
-price of product is a benefit to the producer, not a cost.
-price of product is a benefit to the producer, not a cost.
question
Supply
answer
-is the relationship between the possible prices of something and the quantities that people of firms are willing and able to sell, other things equal.
*supply can change if firms' costs change because either the prices of their resources change or technology that is economically efficient to use changes
*the supply curve slopes upward because of law of diminishing returns
*supply can change if firms' costs change because either the prices of their resources change or technology that is economically efficient to use changes
*the supply curve slopes upward because of law of diminishing returns
question
Demand
answer
-Is the relationship between the possible prices of something & the quantities people are willing to buy, other things equal.
-The demand curve is the same as marginal value curve
-demand can change
-slopes downward because value is decreased
-The demand curve is the same as marginal value curve
-demand can change
-slopes downward because value is decreased
question
law of diminishing returns
answer
-As we add workers to a production facility, eventually they become less productive because there is no way for everyone to take part in the production process.
-so as production increases, marginal cost rises because the extra labor cannot be a productive as previous hired labor
-so as production increases, marginal cost rises because the extra labor cannot be a productive as previous hired labor
question
Marginal Product
answer
The extra output produced by an additional laborer.
question
Social Gain
answer
Total Value - Total Cost
question
Consumers Gain
answer
Total Value - Total Amount Paid
CG-PG
(TV-AP + -AP-TC)
TV-TC
CG-PG
(TV-AP + -AP-TC)
TV-TC
question
Producer's Gain
answer
Total Amount Paid - Total Cost
question
The Economic problem
answer
allocating scarce resources to their best uses
question
Market adjustments
answer
supply and demand can shift, based on changes in market conditions.
question
Changes in supply
answer
are shifts in the supply curve. That is, producers wish to produce more or less, even if the price does not change. They are caused by changes in the producer's costs.
question
Changes in demand
answer
are shifts in the demand curve. That is, consumers wish to buy more or less, even if the price does not change. They are caused by changes in things that influence the consumer's willingness to purchase the product which have nothing to do the product price.
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