Answer to Question #309311 in Macroeconomics for Anjali

Question

You are trying to decide whether to take a vacation. Most of the costs of the vacation (air fair hotel amd forgone wages) are measured in dolla bit the benefits of the vacation are psychological.How can you compare the benefits of the costs?

Answer 1

How can you compare the benefits of the costs?

For a proper analysis of consuming any good, benefits and costs must be evaluated in the same units for comparison. The cost of a vacation (airfare, hotel, and foregone wages) vs the advantages of a vacation (peace, relaxation, and time with family) is a personal choice. If a person does not have enough time to spend with his or her family, these psychological advantages may be necessary, and the cost may be justified. An idle individual, on the other hand, who has ample time to relax and spend with family, may not require these benefits and may not believe that they are worth the expense. The vacation's advantages, on the other hand, are difficult to quantify in monetary terms. The expense is expressed in dollars, while the benefits are expressed qualitatively in terms of psychological well-being. To address this issue, the opportunity cost of taking a vacation in terms of time, effort, and money spent on a vacation, as well as the psychological cost of working, might be considered when comparing the psychological cost of working with the psychological advantages acquired from taking a vacation.