Four Most Important Economic Concepts
  1. Measure costs and benefits as absolute value rather than proportional value.
    • saving $10 on a $2020 laptop is just as valuable as saving $10 on a $25 game.
  2. Account for all costs and benefits.
    • take opportunity cost into account.
    • spending frequent flyer points on flight a vs flight b means the cost of the (optional) trip a now carries the cost of (necessary) flight b.
  3. Ignore sunk costs
    • Once you’ve spent the money and it can’t be retrieved, ignore it.
  4. Know when to use average vs marginal costs and benefits
    • to work out what to charge airline passengers, use averages.
    • to work out whether to launch a shuttle 3 times or 4, use marginals.