Econ: Lesson 2: Opportunity Cost & Trade-Offs: Vocabulary

Trade-Off

The act of giving up one benefit in order to gain another, greater benefit.

G or Butters

A phrase expressing the idea that a country that decides to produce more military goods (“G“) has fewer resources to produce consumer goods (“Butter“) and vice versa.

Opportunity Cost

The most desirable alternative given up as the result of a decision.

Thinking at the Margin

The process of deciding whether to do or use one additional unit of some resources.

Cost/Benefit Analysis

A decision-making process in which you compare what you will sacrifice and gain by a specific action.

Marginal Cost

The extra cost of adding one unit

Marginal Benefit

The extra benefit of adding one unit