Saving and spending are like two very good friends. Where one goes, the other can't be far behind. Why? At the very moment that you decide to spend money on something, say, Diddy Kong Racing™ for your Nintendo 64™ , you are making three decisions. You didn't know you were that busy? Well, think about it.
First, you decided to spend on a cool video game. This means that you won't be able to save the $70 you spend to put toward the color printer you want for the family computer. So your second decision was the decision not to save. Once you decided to spend the $70, you could have chosen any of the other fifteen games you don't have. Your third decision then, was the decision not to buy StarFox™, your second choice if they were out of Diddy Kong Racing™. After you save another $70, you may spend it on StarFox™ or continue saving for the printer. That is, unless they come out with an even cooler game or the card shop gets a new batch of Beanie Babies™.
If you never realized that you were making three decisions every time you spend money, don't feel bad. Most of the time you make these decisions pretty much at the same time so it's hard to tell them apart. You'll get better with practice!
Use the following questions to see if you understand:
- When you think about buying a new video game, the first decision you make is to
- At the same time that you decide to spend your money, you will also decide not to do something, so the second decision you will have made is the decision not to
- When you are at the video store to buy your new game, what is the third decision you make?
- If they have both Diddy Kong Racing™ and StarFox™ in stock, and you buy Diddy Kong Racing™ as you planned, your opportunity cost will be