Applied Economics Lesson 3, Slides of Economics

Download Applied Economics Lesson 3 and more Slides Economics in PDF only on Docsity! VARIATIONS IN BENEFITS AND COSTS DUE TO STAGE OF RECOGNITION Prepared by: Melvin O. Alejandrino OPPORTUNITY COST •The loss of potential gain from another alternatives when one alternative is chosen. 2 PARTS OF VALUE • 1. Benefits • 2. Cost • You’ve chosen the apple because it is cheaper. • You didn’t choose the orange because you don’t like citrus/sour fruits. • You’ve chosen the apple because it helps your skin better than orange. • You didn’t choose the orange because you find it hard to peel one. THE BEST ECONOMIC CHOICE •We always look for the greatest benefit with the lowest cost. IMPLICIT VS EXPLICIT COST •Explicit Cost – cost involving monetary payment. Usually produces receipts. • Implicit Cost – cost involving allocation of resources for a specific purpose. It cannot be easily assigned a monetary value. ECONOMIC COST •The sum of implicit and explicit cost. SITUATION •An employee is paid $30 per hour. He decided to buy a new phone and went to the mall for an hour. The phone costs $250. • therefore, the ECONOMIC COST of the phone is $280. •Explicit Cost - $250 • Implicit Cost - $30