Opportunity Cost

  1. Reservation price is what the price in your mind you are willing to pay for making some decision.
  2. Economists use cost benefit analysis to make decisions.
  3. Utility is enjoyment or satisfaction you get from making economic decisions.
  4. Opportunity cost is a potential cost that is caused by making a decision. It is the next best alternative decision.
  5. People tries to maximize their utility.
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1 Response so far »

  1. 1

    11kimsa said,

    Parent: First of all, I am very impressed with Sang Keun’s economics blog. Because there are limited resources, we always have to make choices. And these choices always have opportunity cost. The bullet points about opportunity cost are very accurate.


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