Opportunity Cost and Marginal Analysis

Opportunity Cost

The benefit of the next best alternative forgone.

High Opportunity Cost

Sacrificing a lot when choosing one option over another.

Lump of Labor Fallacy

The false belief that there’s a fixed amount of work available.

Efficiency Gains

Improvements that result from job evolution and technological advancement.

Nirvana Fallacy

Comparing reality to idealized but unrealistic alternatives.

Marginal Utility

The additional benefit received from consuming one more unit of a good.

Marginal Cost

The costs that increase as more resources are used.

Trade-offs

The concept that, when gaining one thing, another must be sacrificed.

Price Mechanism

A system where prices coordinate decisions and improve efficiency.

Cost-Benefit Analysis

A method to evaluate if the gains outweigh the losses in decision making.