Do ACCT1501 and ECON1101 get scaled down usually? (1 Viewer)

[obliviousninja]

"Incentive principle"?? In pertinence to the cost-benefit principle, an individual will take an action if the benefit of that action is at least as great as the cost. As such, the neighbour will agree to the construction of the driveway as long as the cost of it does not exceed her reservation price. If you look at the demand curve of a good, a consumer will agree to buy the good as long as the cost of the good does not exceed his or her's reservation price. If the cost equals the reservation price, the consumer will still agree to buy the good, and the economic profit consequent of the transaction yields the producer's surplus. That is why the demand curve is essentially the marginal benefit curve.

First of all, you made the assumption that benefit = their reservation price.

Secondly, no one will undertake a particular activity if benefits do not outweigh costs. If they are equal, with every activity there is an associated opportunity cost.

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[fusionillusion]

First of all, you made the assumption that benefit = their reservation price.

Secondly, no one will undertake a particular activity if benefits do not outweigh costs. If they are equal, with every activity there is an associated opportunity cost.

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Buyer's reservation price = benefit = willingness to pay. It's a pretty basic economic concept.