{"id":5808,"date":"2016-07-19T18:00:51","date_gmt":"2016-07-19T18:00:51","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/macroeconomics\/?post_type=chapter&#038;p=5808"},"modified":"2016-07-19T18:00:51","modified_gmt":"2016-07-19T18:00:51","slug":"putting-it-together-economic-thinking","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/chapter\/putting-it-together-economic-thinking\/","title":{"raw":"Putting It Together: Economic Thinking","rendered":"Putting It Together: Economic Thinking"},"content":{"raw":"<h2>Summary<\/h2>\nThe goal of this module was to introduce you to\u00a0the basic questions and tools of economics. You learned how to:\n<ul><li>Explain\u00a0what economics is and why it is important<\/li>\n\t<li>Explain how economists use economic models<\/li>\n\t<li>Use\u00a0mathematics in common economic applications<\/li>\n\t<li>Use\u00a0graphs in common economic applications<\/li>\n<\/ul><h2>The Cost of Waiting in Line<\/h2>\nGiven your new understanding of\u00a0economic concepts, let's revisit the example at the beginning of this module: the experience of\u00a0taking a flight and feeling like others\u00a0have special privileges that you don't have.\n\nIn our example,\u00a0you waited in line at the security checkpoint for much\u00a0longer than those who went through the express line. Let's assume that you waited in line for one hour and 10 minutes, while those with express access were able to get through security in just 10 minutes. What is the cost of one hour of your time? What is the cost of a ticket that gets you into the\u00a0the express lane? Did you make the right choice?\n\nLet's return to the concept of opportunity cost. Remember,\u00a0opportunity cost indicates what must be given up to obtain something that\u2019s desired.\n\nYou chose to wait in line rather than buying a ticket that would allow you to use the express lane. It may not have seemed like a choice, but you did choose to buy a less expensive ticket\u2014instead of paying more for one would have gotten you into the express line. How much more money would you have to pay for that ticket?\n\n<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/1511\/2016\/05\/26213151\/Flight-information.png\" rel=\"attachment wp-att-5699\"><img class=\"aligncenter size-full wp-image-5699\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/342\/2016\/07\/19174049\/Flight-information.png\" alt=\"The least expensive flight is $276, while the Business Select flight that provides access to the express lane for security is $605.\" width=\"781\" height=\"99\"\/><\/a>\n\nOn a flight from Los Angeles to Baltimore, the Business Select fare\u00a0is $605. This is the fare that permits\u00a0access to the express security lane. The lowest fare is $276. The difference is:\n<p style=\"text-align: center;\">$605 - $276 = $329<\/p>\n<p style=\"text-align: left;\">In other words, you chose to wait in line for one hour in order to save\u00a0the $329 that you would have had to spend for a Business Select ticket. When we think of this in terms of opportunity cost, you now\u00a0have some way to measure your decision: you have a firm number that can be compared against the cost of an alternative.<\/p>\n\n<h2 style=\"text-align: left;\">The Full Cost of Your Time<\/h2>\n<p style=\"text-align: left;\">Let's consider\u00a0monetary costs alone. If you had worked at a job for one more hour\u2014instead of waiting in the security line\u2014you could\u00a0have earned an additional $20. That choice would have meant earning more money, but you would have had to spend far more for a Business Select ticket than you made in an hour. Since the $329 cost of that ticket is so much greater than the $20 you might have earned, the decision to wait in line for an hour (as opposed to working one hour more) makes good sense when comparing the monetary cost.<\/p>\n<p style=\"text-align: left;\">But remember, <em>opportunity cost is the value of the next best alternative<\/em>, and there are likely ways that you spend your time that you value more than money. Perhaps getting through security more quickly will enable\u00a0you to sit down in a quiet caf\u00e9, enjoy a cup of tea, and avoid\u00a0the stress you feel when you are rushed. There is a real value that you have given up.<\/p>\n<p style=\"text-align: left;\">Or, what if you are struggling to stay caught up on your schoolwork and an hour of study makes the difference between getting a good grade on an important test or not? If it's\u00a0a test that has a big impact on\u00a0your grade or\u00a0academic record, then an hour might be incredibly valuable.<\/p>\n<p style=\"text-align: left;\">In other words, for any individual, the opportunity cost may\u00a0simply be the lost money from work, or it may be peace of mind, or it may be an hour of study time\u2014or something altogether different. Whichever one of the\u00a0alternatives has the\u00a0greatest value to you\u00a0is your opportunity cost for one hour in line.<\/p>\n\n<h2 style=\"text-align: left;\">Does It Ever Make Sense to Buy Time?<\/h2>\n<p style=\"text-align: left;\">Obviously an hour of time has a different opportunity cost for every individual. Let's take a minute to look at a\u00a0graph of hourly wages and\u00a0see if it helps us think about the opportunity cost.<\/p>\n<p style=\"text-align: left;\"><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/1511\/2016\/05\/26220734\/Flight-Tickets-Purchased.png\" rel=\"attachment wp-att-5700\"><img class=\"aligncenter size-full wp-image-5700\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/342\/2016\/07\/19174052\/Flight-Tickets-Purchased.png\" alt=\"Flight Tickets Purchased\" width=\"599\" height=\"339\"\/><\/a><\/p>\n<p style=\"text-align: left;\">On any flight, passengers with a higher hourly wage are more likely to purchase a Select ticket that permits\u00a0them to bypass security lines and board early. For some\u00a0groups of passengers, the time is more valuable than the\u00a0money. Still, you will note that some passengers are willing to spend more than their hourly wage to avoid waiting in line.<\/p>\n<p style=\"text-align: left;\">The definition of opportunity cost is quite specific: it's\u00a0the value of the next best alternative. However, every individual values time, money, convenience, peace of mind, and other factors differently.<\/p>","rendered":"<h2>Summary<\/h2>\n<p>The goal of this module was to introduce you to\u00a0the basic questions and tools of economics. You learned how to:<\/p>\n<ul>\n<li>Explain\u00a0what economics is and why it is important<\/li>\n<li>Explain how economists use economic models<\/li>\n<li>Use\u00a0mathematics in common economic applications<\/li>\n<li>Use\u00a0graphs in common economic applications<\/li>\n<\/ul>\n<h2>The Cost of Waiting in Line<\/h2>\n<p>Given your new understanding of\u00a0economic concepts, let&#8217;s revisit the example at the beginning of this module: the experience of\u00a0taking a flight and feeling like others\u00a0have special privileges that you don&#8217;t have.<\/p>\n<p>In our example,\u00a0you waited in line at the security checkpoint for much\u00a0longer than those who went through the express line. Let&#8217;s assume that you waited in line for one hour and 10 minutes, while those with express access were able to get through security in just 10 minutes. What is the cost of one hour of your time? What is the cost of a ticket that gets you into the\u00a0the express lane? Did you make the right choice?<\/p>\n<p>Let&#8217;s return to the concept of opportunity cost. Remember,\u00a0opportunity cost indicates what must be given up to obtain something that\u2019s desired.<\/p>\n<p>You chose to wait in line rather than buying a ticket that would allow you to use the express lane. It may not have seemed like a choice, but you did choose to buy a less expensive ticket\u2014instead of paying more for one would have gotten you into the express line. How much more money would you have to pay for that ticket?<\/p>\n<p><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/1511\/2016\/05\/26213151\/Flight-information.png\" rel=\"attachment wp-att-5699\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-5699\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/342\/2016\/07\/19174049\/Flight-information.png\" alt=\"The least expensive flight is $276, while the Business Select flight that provides access to the express lane for security is $605.\" width=\"781\" height=\"99\" \/><\/a><\/p>\n<p>On a flight from Los Angeles to Baltimore, the Business Select fare\u00a0is $605. This is the fare that permits\u00a0access to the express security lane. The lowest fare is $276. The difference is:<\/p>\n<p style=\"text-align: center;\">$605 &#8211; $276 = $329<\/p>\n<p style=\"text-align: left;\">In other words, you chose to wait in line for one hour in order to save\u00a0the $329 that you would have had to spend for a Business Select ticket. When we think of this in terms of opportunity cost, you now\u00a0have some way to measure your decision: you have a firm number that can be compared against the cost of an alternative.<\/p>\n<h2 style=\"text-align: left;\">The Full Cost of Your Time<\/h2>\n<p style=\"text-align: left;\">Let&#8217;s consider\u00a0monetary costs alone. If you had worked at a job for one more hour\u2014instead of waiting in the security line\u2014you could\u00a0have earned an additional $20. That choice would have meant earning more money, but you would have had to spend far more for a Business Select ticket than you made in an hour. Since the $329 cost of that ticket is so much greater than the $20 you might have earned, the decision to wait in line for an hour (as opposed to working one hour more) makes good sense when comparing the monetary cost.<\/p>\n<p style=\"text-align: left;\">But remember, <em>opportunity cost is the value of the next best alternative<\/em>, and there are likely ways that you spend your time that you value more than money. Perhaps getting through security more quickly will enable\u00a0you to sit down in a quiet caf\u00e9, enjoy a cup of tea, and avoid\u00a0the stress you feel when you are rushed. There is a real value that you have given up.<\/p>\n<p style=\"text-align: left;\">Or, what if you are struggling to stay caught up on your schoolwork and an hour of study makes the difference between getting a good grade on an important test or not? If it&#8217;s\u00a0a test that has a big impact on\u00a0your grade or\u00a0academic record, then an hour might be incredibly valuable.<\/p>\n<p style=\"text-align: left;\">In other words, for any individual, the opportunity cost may\u00a0simply be the lost money from work, or it may be peace of mind, or it may be an hour of study time\u2014or something altogether different. Whichever one of the\u00a0alternatives has the\u00a0greatest value to you\u00a0is your opportunity cost for one hour in line.<\/p>\n<h2 style=\"text-align: left;\">Does It Ever Make Sense to Buy Time?<\/h2>\n<p style=\"text-align: left;\">Obviously an hour of time has a different opportunity cost for every individual. Let&#8217;s take a minute to look at a\u00a0graph of hourly wages and\u00a0see if it helps us think about the opportunity cost.<\/p>\n<p style=\"text-align: left;\"><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/1511\/2016\/05\/26220734\/Flight-Tickets-Purchased.png\" rel=\"attachment wp-att-5700\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-5700\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/342\/2016\/07\/19174052\/Flight-Tickets-Purchased.png\" alt=\"Flight Tickets Purchased\" width=\"599\" height=\"339\" \/><\/a><\/p>\n<p style=\"text-align: left;\">On any flight, passengers with a higher hourly wage are more likely to purchase a Select ticket that permits\u00a0them to bypass security lines and board early. For some\u00a0groups of passengers, the time is more valuable than the\u00a0money. Still, you will note that some passengers are willing to spend more than their hourly wage to avoid waiting in line.<\/p>\n<p style=\"text-align: left;\">The definition of opportunity cost is quite specific: it&#8217;s\u00a0the value of the next best alternative. However, every individual values time, money, convenience, peace of mind, and other factors differently.<\/p>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-5808\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Putting It Together: Economic Thinking. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":18,"menu_order":22,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Putting It Together: Economic Thinking\",\"author\":\"\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-5808","chapter","type-chapter","status-publish","hentry"],"part":5757,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/wp-json\/pressbooks\/v2\/chapters\/5808","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/wp-json\/wp\/v2\/users\/18"}],"version-history":[{"count":1,"href":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/wp-json\/pressbooks\/v2\/chapters\/5808\/revisions"}],"predecessor-version":[{"id":6045,"href":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/wp-json\/pressbooks\/v2\/chapters\/5808\/revisions\/6045"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/wp-json\/pressbooks\/v2\/parts\/5757"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/wp-json\/pressbooks\/v2\/chapters\/5808\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/wp-json\/wp\/v2\/media?parent=5808"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/wp-json\/pressbooks\/v2\/chapter-type?post=5808"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/wp-json\/wp\/v2\/contributor?post=5808"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/wp-json\/wp\/v2\/license?post=5808"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}