Economics is about making choices. We do it everyday, whether it’s in business or one’s personal life, resources like time or money are limited. This forces us to evaluate trade-offs and figure out which will make us happiest.
When you’re at McDonald’s, do you order the #1 combo meal or just a drink and the Big Mac? It depends. People value things differently. Value is subjective. If you value the fries more than the difference in price, you order the combo meal. If you don’t, you only purchase the drink and the Big Mac. This is the trade-off.
Another example: In March I really wanted to go to the Big Ten basketball tournament, but my adorable wife was not so enthused. However, after I begged and pleaded, she decided it might be OK to have a weekend-long college basketball experience. But only under the one condition that I would take ballroom dancing classes with her. The trade-off is straight forward. If the benefit (a fun time at the tournament) is greater than the cost (embarrassment of having to take ball-room dancing lessons), I should take her offer. If not, I should watch the basketball games at home on television.
You should not be intimidated by economics and economic jargon. Economics can and will be explained in every day language on this blog. Economic decision-making is everywhere, and that’s why I’m learning the Waltz.
By: Wade Rousse