Principles of Microeconomics (extension)

• unbounded rationality
• unbounded willpower
• unbounded selfishness

• Framing: how a choise is presented strongly affects our decision
• Anchoring: recently received infomration appears to be relevant for decisions
• Status Quo: preference for familiarity, tendency to resist change
• Sunk cost: continue to do something, just because we've already spent resources on it
• Endowment effect: people give more value to things they own
• Loss aversion: prefer avioding losses to acquiring gains --> explains sunk cost, endowment

• Discounting/present bias: near future rewards are valued higher than more distant
• Limited self-control: tendency to decisions that are not according to our long-run interests (e.g. eat and spend too much insead of exercise and save)

People tend to act fair and seek equity in economic outcomes, altough it does not maximize their utility

Visual model of economy that shows how dollars flow through markets among households and firms.

Graph that shows the combinations of output that economy can possibly produce given the available factors of production (inputs) and the available technology

• Positive statements: statements that attempt to describe the world as it is
• Normaitve statements: statements about how the world should/ought be

• One seller who controls/influences the price
• High barriers to entry