Opportunity Cost The next best alternative.. Marginal Analysis A decision-making tool for comparing the additional or marginal benefits of a course of.

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Presentation transcript:

Opportunity Cost The next best alternative.

Marginal Analysis A decision-making tool for comparing the additional or marginal benefits of a course of action to the additional or marginal costs. The best decisions are made at the margin!

Economic Way of Thinking If the marginal (additional) benefit of an action is greater than the marginal (additional) cost, DO IT! If the marginal (additional) benefit of an action is less than the marginal (additional) cost, DON’T DO IT!

Economic Models Simplified Representation of the Real World Models are limited. No model can take into account every detail or possibility that exists in the real world.

Supply and Demand