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- [Tyler] Once you master [br]the economic way of thinking,

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you'll see the world [br]in a very different way.

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Two fundamental economic concepts [br]are everywhere you look --

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opportunity costs, and tradeoffs.

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Let's start with opportunity costs.

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At this busy coffee shop,

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opportunity costs lie [br]behind every decision.

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Like for Jenny -- she's here [br]for her third date with Adam.

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Was that a good decision?

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After all, economics is [br]all about studying decisions.

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Making a good decision is [br]about comparing the benefits

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of that decision to the costs.

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The obvious costs for this date

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for Jenny were the Uber ride[br]she paid for to get here,

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and her grande chai tea latte[br]with whole milk.

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But what's missing?

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Her opportunity cost.

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Opportunity cost means the value [br]of the next best alternative.

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For instance, instead of going[br]on her third date with Adam,

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Jenny could've been binge watching[br]her favorite tv show.

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She might've been [br]on a first date instead,

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with Roman.

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Or she might've been [br]having breakfast

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with her very sweet sister.

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Let's say her next best option

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would've been [br]breakfast with her sister.

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Does the benefit [br]of this third date with Adam

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outweigh the opportunity cost?

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It might seem strange [br]to think this way about romance,

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and it doesn't mean it's [br]about calculating every decision

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to the last penny.

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Nonetheless, Jenny's time, [br]attention and energy --

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those are scarce.

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And if she doesn't consider [br]the alternatives at all,

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she might be wasting [br]parts of her life.

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There's another [br]fundamental related concept

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from economics -- tradeoffs.

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Take these sprinklers [br]in the ceiling of the coffee shop,

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foe example.

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Adding sprinklers can [br]make it safer during a fire,

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but they also can cost [br]a lot of money to install.

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How much cheaper would [br]the coffee be without them?

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In a world of scarce resources,[br]one typically has to choose.

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There's a tradeoff -- [br]safer buildings cost more,

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but that means the coffee can [br]be more expensive.

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The line is out the door here.

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Perhaps the owner has considered[br]opening a second location.

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As the building code however[br]becomes more stringent,

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the cost of opening [br]an additional location goes up.

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It's not just the direct [br]monetary costs of paying

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for things like sprinklers.

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It's also the opportunity costs[br]of the extra time and effort

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to file permits, manage the work[br]and schedule inspections.