Many ideas underpin the economic style of thinking
People are supposed to be rational, which means that they choose the best decision. Scarcity of resources, the need to make a choice, and the opportunity cost are all important considerations when making economic decisions. The gain foregone by foregoing the next best alternative is known as opportunity cost, and it represents the relationship between scarcity and choice (Mankiw, 2007).
Peyton Manning must decide whether to mow his own lawn or hire Kris, a gardener
As a result, he must examine the activities he must complete and prioritize them. If mowing his lawn is high on his priorities, he has to consider who is better off doing the job. If Kris does the job he will work for three hours thus charging a total of $90. Although Peyton can mow in two hours, the most fundamental question would be how much is his time worth. He could be a CEO making his hour worth thousands of dollars, and it could also be worth much less. If Peyton’s time can be accorded numerical value in dollars, he should mow his lawn when his time is worth less than $45 an hour. If it is worth more he should give the job to Kris and if equal he would be indifferent and thus consider other factors to make the decision.
Apart from the opportunity cost, Peyton should also give attention to other factors such as specialty (Yang, 1997)
If Kris is a professional mower and he is not it would be to his benefit to allow Kris complete the task as he concentrates on his field of work. Given that Kris is a gardener he would most probably do a better job.
References
Mankiw, N, G (2007). Microeconomics. New York: Worth Publishers.
Yang, X. (1997). Economics. Department of Economics, Monash University.
