Economics class notes
You can not select more than 25 topics Topics must start with a letter or number, can include dashes ('-') and can be up to 35 characters long. 844B

January 26 Notes

Sunk Costs

Sunk Costs are costs that have been paid and cannot be recovered.

For Example:

  • Bought Tickets
  • Gambling
    • the sunk cost fallacy is the idea the more money spent in gambling increases your chances of winning

A rational decision benefits the decision maker as much as possible.

A self-interested individual makes decisions for his or her benefit

Wearing a seat belt is an example of a rational decision

The net benefit of a choice is the benefit minus the cost in dollars.

Marginal benefit is the additional benefit doing something one more time.

** Marginal cost** is the additional cost of doing something one more time.

Marginal analysis -- Decision making process by comparing marginal cost and benefits

For Example:

  • Pop Tarts
  • Individual or season tickets?