Introductory Microeconomics

The central economic problem

Scarcity: human wants are unlimited, but the means to satisfy those wants are unlimited

Net benefit

Total benefit - Total cost

Absolute advantage

ability to produce a good using fewer inputs than another producer

Comparative advantage

ability to produce a good at a lower opportunity cost than another producer

Sunk costs

value of resources that were already used before making a decision about which action to take

Opportunity cost

The value of resources used in taking that action in their next best alternative use

Public goods

Goods that are non excludable and non rival

Common goods

Goods that are non excludable and rival

Excludable good

Good that people can be prevented from using

Private good

Good that is both excludable and rival

Luxury good