How do economic incentives influence the decisions individuals make in their daily lives?
A student has to decide whether to work an extra hour at a part-time job. The marginal cost is giving up an hour of free time, while the marginal benefit is earning extra money for a desired purchase.
Example: Marginal Cost and Marginal Benefit
You have the opportunity to time travel, but there are two options: Option 1 - You can go back in time and witness a historical event, but you cannot interact with anyone or anything. Option 2 - You can go forward in time and see how the world has changed, but you cannot return to the present. Which option would you choose?
- Witness a historical event without interaction
- See how the world has changed in the future
In order to save money for a vacation, a student decides to work part-time after school. As a result, they have less time for studying and extracurricular activities.
Cost-benefit analysis is like deciding if something is worth it. It helps us see if the good things (benefits) are more than the bad things (costs). For example, if you want a toy, we think about how much it costs and how much fun we will have playing with it. If the fun is more than the cost, then it's a good choice!
Draw a monkey dressing up as a superhero and flying a giant slice of pizza as its mode of transportation.