Reservation option
The next best alternative
Economic Cost
Direct costs incurred by taking an action + opportunity
Economic Rent
Net benefit from option taken -opportunity cost
Innovation Rent
A form of economic rent - the extra profits made by exploiting an invention - provides incentive for taking action
Endogenous variables
Variables within a model whose values are determined by the relationships in the model
e.g if model says consumption depends on income then consumption = endogenous
Exogenous variables
Variables outside a model not determined by the model itself
E.g in a model if consumption depends on income then income = exogenous
Employment rent
Extra benefit a workers gets from keeping a job compared to their next best alternative
Intrinsic Impatience
people prefer current consumption over future consumption, have a high time preference, more likely to save less and borrow more
Altruistic preferences
Endowments
Individuals utility depend not only on their own consumption but also on the well being of others
