1.2 Opportunity Cost
Trade-off
Act of giving up one benefit in order to gain another, greater benefit
Sleep late or wake up early to study- what is the opportunity cost?
If you choose to sleep late, opportunity cost is extra study time. if you choose to wake up early to study, opportunity cost is extra sleep time.
Cost/benefit analysis
decision making process in which you compare what you will sacrifice and gain by a specific action
Marginal COST
extra cost of adding one unit, whether its sleeping an extra hour or building an extra house
Decision making grid
helps determine whether youre willing to accept the opoortunity cost of a choice you are about to make by weighing benefits of each choice in a table
Opportunity Cost
most desirable alternative somebody gives up as a result of a decision
Marginal BENEFIT
the extra benefit of adding one unit
Guns or Butter
when governments must make a choice between spending money on military of domestic needs
Thinking at the margin
when you decide how much more or less to do/ process of deciding whether to do or use one additional unit of some resource
