Chapter 3 economics
Sunk Cost
A cost that's already been paid and cannot be recovered
Rational Decision
A decision where a person's goals are advanced as much as possible, given the limited money and time available
Impatience
A feeling or desire for immediate satisfaction
Worry over Fairness
A tendency to respond to fairness instead of self interest
Net Benefit
Describes the benefit of the choice minus it's cost
Framing
Describes the way choices are presented
Self-Interested
Describes when people make decisions for their own benefit to further their own objectives
Tradeoff
Describes when you give up one thing to get something else
Marginal Benefit
The additional benefit of taking the next step and doing something one more time
Marginal Cost
The additional cost of taking the next step and doing something one more time
Behavioral Economics
The branch of economics that merges psychology into explanations of economic behavior
Sunk Cost Bias
The indication to let irrelevant costs be a part of a decision
Status Quo Bias
The tendency to keep things the way they are and not try new opportunities
Overconfidence
The tendency to overestimate the ability to forecast what will happen
Budget
The term is the total amount of money that a person has to spend on goods and services
Opportunity Cost
The value of the next best alternative given up when a choice is made
Budget Line
This represents the combination of the two items that you can afford if you spend your budget