Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 1 - Part I - Ten Principles of Economics - Problems and Applications: 2

Answer

When the benefits of something are psychological, such as going on a vacation, it isn't easy to compare benefits to costs to determine if it's worth doing. But there are two ways to think about the benefits. One is to compare the vacation with what you would do in its place. If you didn't go on vacation, would you buy something like a new set of golf clubs? Then you can decide if you'd rather have the new clubs or the vacation. A second way is to think about how much work you had to do to earn the money to pay for the vacation; then you can decide if the psychological benefits of the vacation were worth the psychological cost of working.

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