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The core principles of economics - Coggle Diagram
The core principles of economics
The cost-benefit principle
Full set of costs and benefits
The benefits >= the costs
Economic surplus = total benefits - total cost
Opportunity cost
The next best alternative you have to give up
The problem of scarcity
Time
Income
Attention
How to find the opportunity cost:
Or what?
Sunk cost
A cost that has been used, however cannot be reversed.
Good decisions ignore sunk costs.
Marginal principle
Marginal benefit
The extra benefit you get from one extra unit
Marginal cost
The extra cost from that extra unit
How many --
"Should I?"
Rational Rule: keep doing it until your marginal benefit = your marginal cost.