Changes

“Net benefits” are total benefits minus total costs.

“Net benefits” are total benefits minus total costs.

“Opportunity cost” is the value lost in order to do something.  Doing a job that pays only $5 per hour when you could have taken a different job at $12 per hour has an opportunity cost for you of $12-5 = $7 per hour.  Wasting three hours stuck in traffic has an opportunity cost of the money you could have been earning for those three hours, such as the minimum hourly wage times three.

“Opportunity cost” is the value lost in order to do something.  Doing a job that pays only $5 per hour when you could have taken a different job at $12 per hour has an opportunity cost for you of $12-$5 = $7 per hour.  Wasting three hours stuck in traffic has an opportunity cost of the money you could have been earning for those three hours, such as the minimum hourly wage times three hours.

“Marginal analysis” consists of looking at the costs and benefits of an '''''incremental''''' change, rather than the overall costs and benefits.  For example, if you are already standing outside a grocery store, then the marginal cost of stopping in to buy a carton of milk is only a few minutes of your time plus the cost of the milk.  But if you are sitting at home, then the marginal cost of buying a carton of milk is much greater: you must get into your car and drive all the way to a grocery store, which takes much longer and consumes expensive gas, in addition to the cost of the milk.

“Marginal analysis” consists of looking at the costs and benefits of an '''''incremental''''' change, rather than the overall costs and benefits.  For example, if you are already standing outside a grocery store, then the marginal cost of stopping in to buy a carton of milk is only a few minutes of your time plus the cost of the milk.  But if you are sitting at home, then the marginal cost of buying a carton of milk is much greater: you must get into your car and drive all the way to a grocery store, which takes much longer and consumes expensive gas, in addition to the cost of the milk.