ECON 200 Chapter Notes - Chapter 8: Cognitive Bias, Spring Break, Fallacy
31 Jan 2018
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If the benefits of doing something are greater than the opportunity costs, rational people will do it. Why is it not part of the opportunity cost of a decision: what is the implicit cost of ownership, forgetting about fungibility, something is fungible if it is easily exchangeable or substitutable. An example of a fungible good is cash: creating mental categories for money, people often divide savings into categories such as rent or groceries. Others keep special funds for specific large purchases such as gifts or vacations. Imagine you have saved ,000 from working and your friends want to go on a ,000 spring break trip; also assume you have a credit card. You mentally label the money spring break fund and promise not to touch it. A few months before break, you need some money for books and supplies.
