-
Not Synced
- [Tyler] Once you master
the economic way of thinking,
-
Not Synced
you'll see the world
in a very different way.
-
Not Synced
Two fundamental economic concepts
are everywhere you look --
-
Not Synced
opportunity costs, and tradeoffs.
-
Not Synced
Let's start with opportunity costs.
-
Not Synced
At this busy coffee shop,
-
Not Synced
opportunity costs lie
behind every decision.
-
Not Synced
Like for Jenny -- she's here
for her third date with Adam.
-
Not Synced
Was that a good decision?
-
Not Synced
After all, economics is
all about studying decisions.
-
Not Synced
Making a good decision is
about comparing the benefits
-
Not Synced
of that decision to the costs.
-
Not Synced
The obvious costs for this date
-
Not Synced
for Jenny were the Uber ride
she paid for to get here,
-
Not Synced
and her grande chai tea latte
with whole milk.
-
Not Synced
But what's missing?
-
Not Synced
Her opportunity cost.
-
Not Synced
Opportunity cost means the value
of the next best alternative.
-
Not Synced
For instance, instead of going
on her third date with Adam,
-
Not Synced
Jenny could've been binge watching
her favorite tv show.
-
Not Synced
She might've been
on a first date instead,
-
Not Synced
with Roman.
-
Not Synced
Or she might've been
having breakfast
-
Not Synced
with her very sweet sister.
-
Not Synced
Let's say her next best option
-
Not Synced
would've been
breakfast with her sister.
-
Not Synced
Does the benefit
of this third date with Adam
-
Not Synced
outweigh the opportunity cost?
-
Not Synced
It might seem strange
to think this way about romance,
-
Not Synced
and it doesn't mean it's
about calculating every decision
-
Not Synced
to the last penny.
-
Not Synced
Nonetheless, Jenny's time,
attention and energy --
-
Not Synced
those are scarce.
-
Not Synced
And if she doesn't consider
the alternatives at all,
-
Not Synced
she might be wasting
parts of her life.
-
Not Synced
There's another
fundamental related concept
-
Not Synced
from economics -- tradeoffs.
-
Not Synced
Take these sprinklers
in the ceiling of the coffee shop,
-
Not Synced
foe example.
-
Not Synced
Adding sprinklers can
make it safer during a fire,
-
Not Synced
but they also can cost
a lot of money to install.
-
Not Synced
How much cheaper would
the coffee be without them?
-
Not Synced
In a world of scarce resources,
one typically has to choose.
-
Not Synced
There's a tradeoff --
safer buildings cost more,
-
Not Synced
but that means the coffee can
be more expensive.
-
Not Synced
The line is out the door here.
-
Not Synced
Perhaps the owner has considered
opening a second location.
-
Not Synced
As the building code however
becomes more stringent,
-
Not Synced
the cost of opening
an additional location goes up.
-
Not Synced
It's not just the direct
monetary costs of paying
-
Not Synced
for things like sprinklers.
-
Not Synced
It's also the opportunity costs
of the extra time and effort
-
Not Synced
to file permits, manage the work
and schedule inspections.
-
Not Synced
A more stringent building code
means a higher cost
-
Not Synced
for opening up new businesses.
-
Not Synced
And in turn,
that higher cost can mean
-
Not Synced
that fewer new businesses
get opened.
-
Not Synced
What's the right tradeoff
between making buildings safer...
-
Not Synced
and making it easier
to launch new businesses?
-
Not Synced
Once you see these tradeoffs,
-
Not Synced
you'll find them
everywhere you look --
-
Not Synced
healthcare,
-
Not Synced
food,
-
Not Synced
the environment.
-
Not Synced
education.
-
Not Synced
One more decision to consider --
-
Not Synced
if you're a teacher, should you spice up