ECON 222 Lecture Notes - Lecture 3: Opportunity Cost, Impulsivity
Document Summary
When an economic agent chooses the best feasibly option, she is optimizing. Optimization in levels calculates the total net bene t of different alternatives and then chooses the best alternative evidence-based economics: How does location affect the rental cost of housing: opportunity cost associated with commuting. Do you always make the best choice: no. Why not: lack of information, not considering all opportunity costs, impulsivity sometimes it"s dif cult to make choices because. You are inexperienced in dealing with a given situation. You place a greater value of the time you spent in the car. Higher opportunity cost associated with community optimizing in levels. Express all costs and bene ts in the same unit (like $) Calculate total net bene t (bene ts-costs) for each option decision-making using marginal analysis. What"s the net bene t of ordering one more? (food example) You make these decisions incrementally optimizing in differences: Express all costs in the same unit.
