Principles of Economics: Microeconomics - Opportunity Cost and Tradeoffs

Opportunity cost and tradeoffs are two fundamental concepts from economics and they are all around us. Tyler Cowen shares the definition of opportunity cost: the value of your next best alternative. Time, space, or resources used to achieve one goal can’t (usually) be used simultaneously to achieve another. A few examples of opportunity costs show that we face them all the time–even when we’re making decisions that don’t revolve around spending money. Some opportunity costs, like the value of spending time with loved ones, can’t easily be quantified in dollars and cents, so there’s no simple formula or calculator for opportunity cost. Because resources are scarce, tradeoffs are everywhere. For example, building codes can require entrepreneurs to install sprinklers, safety glass, and other strategies to keep consumers safe. However, the cost of these building improvements can increase the costs of products and prevent new businesses from being opened. Economics can help you understand these tradeoffs so you can navigate them. Once you master the economic way of thinking, you’ll see these tradeoffs everywhere you look. Get our FREE Intro to Economics unit plan: https://mru.io/4lh Continue learning with practice questions: https://mru.io/n34 Watch the next video: https://mru.io/x79 00:00 Intro 00:24 Opportunity Cost 01:30 Cost Benefit Analysis 01:58 Tradeoffs 02:37 Examples of Tradeoffs