econ quiz 1 review terms

opportunity cost

• facing a decision between 2 best options, what you leave on the table from choosing 1 and not the other (if you choose a, benefits you didn’t choose with b)

• prioritizing convenience over $25, $25 is the opportunity cost

sunk cost

when a cost has happened in the past and cannot be changed

marginal cost

after facing a decision, starts after choosing an option, additional costs need to be less than marginal benefits in order for a decision to be worth it | additional costs that you may take on after facing a decision

marginal benefit

after facing a decision, starts after choosing an option, benefits have to outweigh costs | additional benefits that you may receive after facing a decisions

confounding variable

an influence on the dependent variable that the experimenter could not/did not control for(unexpected) economics research will almost always have a confounding variable

selection bias

drawing conclusions from data that is unrepresentative of the population being studied

availability bias

basing conclusions on vivd examples rather than the entire set

confirmation bias

tendency to interpret data in a manner that supports a pre-existing belief/bias

reporting bias

when asking questions in a survey, the people reporting might not be telling the truth

choice fatigue

inaction or unideal action resulting from too many choices

hypothetical bias

tendency to make unrealistic statements when presented with surveys and other non-binding scenarios

endowment

tendency to overprice the value of an item

game theory

studying decisions within the context of interactions with other people

perverse incentive

not a bad outcome, when the design of that incentive operates in the opposite direction of what is intended

incentives

an encouragement for someone to do something, NOT a mandate

externalities

either an unexpected or unanticipated effect of a policy or decision on an outside party