Unit 1 Notes: Utility and Cost

Marginal:         Extra or additional (Marginal Cost, Marginal Benefit)

                        Economic decisions are always made on the basis of marginal cost and marginal benefit

Economics focuses on making decisions in the future or present, we cannot change the past.

Utility:             Happiness/satisfaction

Marginal Utility:      Additional Satisfaction

Law of Diminishing Marginal Utility:    

                        Additional utility for the consumer decreases as additional units are consumed.

Total Utility:    Total units consumed

Sunk Cost:       A cost you cannot get back therefore should not be considered when making a decision

Explicit Cost:  Out of pocket expenses

Implicit Cost:  The value of resources that could have been used elsewhere

Ignored Cost:  Cost you would have no matter what decision you make