Chapter 1: Thinking Like an Economist

Chapter 1: Thinking Like an Economist

by Maximilian Schillings

1. Four Important Decision Pitfalls

1.1. Pitfall 1: Measuring Costs and Benefits as Proportions rather than Absolute Money Amounts

1.2. Pitfall 2: Ignoring Opportunity Costs

1.3. Pitfall 3: Failure to Ignore Sunk Costs

1.3.1. Sunk Cost

1.4. Pitfall 4: Failure to Understand the Average-Marginal Distinction

1.4.1. Marginal Cost

1.4.2. Marginal Benefit

1.4.3. Average Cost

1.4.4. Average Benefit

2. Rational Person

2.1. Motivation

3. Economic Surplus

4. Economics

4.1. Microeconomics

4.2. Macroeconomics

4.3. Statements

4.3.1. Positive

4.3.2. Normative

5. Opportunity Cost

6. Principles

6.1. Scarcity Principle

6.1.1. TANSTAAFL

6.2. Cost-Benefit Principle

6.2.1. Benefit

6.2.2. Cost