Mitch has $100 to spend and wants to buy either a new amp or new mp3 player. Both cost $100 so he can only buy one. This illustrates the concept that
people face trade-offs
What represents the principle represented by the adage, “there’s no such thing as a free lunch?”
Kendra must decide between going to Colorado or Cancun for spring break.
A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of society in a fair manner. In other words, the society faces trade offs between
efficiency and equality.
High school athletes who skip college to become professional athletes
understand that the opportunity cost of attending college is very high.
Denise decides to spend 3 hours working overtime rather than watching a video with her friends. She earns 10 dollars an hour. Her opportunity cost of working is
the enjoyment she would have received has she watched the video.
A rational decision maker takes an action only if
the marginal benefit is greater than the marginal cost.
The marginal benefit Claire gets from purchasing a third pair of flip-flops is
the total benefit Claire gets from purchasing 3 pairs of flip flops minus the total benefit she gets from purchasing 2 pairs of flip flops.
You are considering staying in college another semester so that you can complete a major in Economics.In deciding wether or not you should stay you should
compare the cost of staying one more semester to the benefits of staying one more semester.
People are willing to pay more for a diamond than for a bottle of water because
the marginal benefit of an extra diamond far exceeds the marginal benefit of extra bottle of water.
People are likely to respond to a policy change if
the policy changes either the costs or benefits of their behavior.
Suppose Massachusetts passes a law that increases the tax on alcohol. As a result,residents start purchasing alcohol from other states. This illustrates that
people respond to incentives.