Answer to Question #288616 in Macroeconomics for Delaney

Question

1. You are trying to decide whether to take a vacation. Most of the costs of the vacation (airfare, hotel, and forgone wages) are measured in dollars, but the benefits of the vacation are psychological. How can you compare the benefits to the costs?

Answer 1

When you spend money on pleasure, the cost question is never raised since the cost has no meaning because the money is being spent for your pleasure, which is a psychological issue, and thus comparing the cost to benefits is never an issue. You can say at most that it is an opportunity cost for you, and if the vacation provides you with more psychological benefits, we can claim that the cost is less than the benefits.

In other words, weigh the advantages of what you will miss out on by taking a holiday against the advantages of taking a vacation.