Question

• According to the Principles of Economics, economic principles guide how we make economic choices and how we interact in the market. What role do economic principles play in your personal economic decisions (choices)? Do you encounter scarcity either personally or in your workplace? What are the kinds of scarcity you encounter?
• To make rational economic decisions, we need to compare costs and benefits. Suppose you are trying to decide whether to take a vacation. The majority of the costs of the vacation are measured in monetary terms (dollars), but the benefits of the vacation are generally non-monetary in nature. How do you compare the non-monetary benefits with the monetary costs? What are the economic (opportunity) costs of going on vacation? Explain in terms of economic costs, which include both monetary and nonmonetary costs.

Answer 1

Economic principles play major role when we make personal choices since a rational human being behave in such a manner. For example one of the basic principles is agents respond to incentives. This gets reflected in our own choices since we prefer discounts on price or free goods while purchasing things from market.  

I encounter scarcity both at home and work place infact every place has scarcity of resources since resources are limited. Say for example at workplace I feel the scarcity of labor which puts more pressure on me. Time is a scare resource while working. Similarly at home in the city say Manhattan,  I feel scarcity of space which is because of the high price of land which is again scarce. Also I face scarcity of luxury cars which i can't buy due to scarcity of resources.

Economic costs of a vacation will consider both monetary and non monetary costs. Not only in case of vacation, economic costs always consider both monetary and non monetary costs. Some of the monetary costs of a vacation are the cost of traveling to a place, the cost of staying in a holiday home or hotel. The cost of traveling around the place in the holiday destination. The purchasing of goods in such a place and getting back to home are some of the monetary costs of vacation. Coming to the monetary measures in terms of opportunity cost is the next best alternative that could have been chosen such as staying back and saving the whole expenses and invest it in stocks or saving it in a bank. The opportunity cost is also the interest that is forgone from such saving. The opportunity cost in non monetary terms is the leisure that I could have taken sitting back at home and enjoying the calmness. Thus various dimensions are checked before we do an analysis on economic cost of a subject.