Economics: Transactions, Utility, and Value

These flashcards cover key concepts related to transactions, utility, and value in economics, providing definitions for essential terms discussed in the lecture.

Transaction

A reciprocal exchange of two things of value between two parties, constituting the building block of the economy.

Expected Utility (E(u))

The utility one expects from ownership or use of the object received in a transaction.

Expected Cost (E(c))

The cost one expects to incur from engaging in a transaction.

Utility

The subjective measure of satisfaction an economic actor derives from consuming a good or service.

Exchangeable Value

The measure of what others are willing to sacrifice to acquire a good or service.

Barter

An exchange of two things of value without the mediation of a base commodity or currency.

Transfer

A unidirectional transaction where something of value is given without creating a reciprocal obligation.

Voluntary Transaction

A transaction that occurs only if both parties perceive the value obtained to be greater than or equal to the value forgone.

Commoditized

When a good or service's exchangeable value drops due to an abundant supply.

Production Costs

The expenses incurred in creating an item, influencing its exchangeable value.

Division of Labor

The specialization and trade that increases efficiency and contributes to economic growth.

Intrinsic Value

The mistaken belief that an object can have value in and of itself, as opposed to value being assigned by observers.

Expected Value

The anticipated value that justifies the decision to engage in a transaction.

Niche Goods

Goods desired by a select few with significant purchasing power, affecting their exchangeable value despite low utility for the average consumer.

Zero-sum Game

A situation where one actor's gain is equivalent to another actor's loss, in contrast to growth in the economy.

Consumption

The process of increasing one’s well-being through the output of production by oneself or others.

Labor in Classical Economics

Labor defined as the production of output with exchangeable value, regardless of payment.

Obligation of Reciprocity

The mutual understanding and expectation that something is due in return for the provision of an item in a transaction.

Living Standards

The level of wealth, comfort, material goods, and necessities available to a certain socioeconomic class in a certain geographic area.

Emotional Utility

The satisfaction derived from emotional and psychological wants through consumption and experiences.

Supply and Demand

Economic model that explains the interaction between the willingness of buyers to purchase and sellers to provide goods and services, influencing exchangeable value.