[MUSIC] The second principle has to do with how people make decisions.

An economists in general propose that people make decisions based on cost and

benefits and you seem that you take an action, when the benefits of taking that

action outweigh the costs of taking that action.

And I gotta say, very simple principle, but when you apply it, it doesn't seem as

simple. So let's try, let's try to apply without,

with again using an example. Say this is the only course you're

taking, it's a course on macroeconomics. but perhaps that's the case, but let's

assume that you're taking more than one. Let's say you're taking this course and

then you're also taking a course in astronomy, could be another, but let's

assume it's a course in astronomy. So, every week you have to decide to

allocate your time between answering problems of economics versus answering

problems in astronomy. These are the only two courses you have

then every time you spend an hour or two hours studying for economics, the

opportunity costs, are the problems that you're not going to be able to answer for

the other class, astronomy. So, let's be a little more specific.

Say that you have here, you're able to calculate exactly how many minutes it

takes you to answer a question in each class and this is a table we have right

here. These are the minutes it takes you answer

questions in economics and questions in astronomy.

So, the first, if you answer economics question, the first problem will take you

5 minutes to answer, the second problem will take you 10 minutes, the third

problem will take you 15 minutes, and the fourth problem will take you 20 minutes.

Now, clearly it takes a different time to answering problems, because when I made

the simple assumption, which is the realistic assumption is that you're

probably going to start with the easy problems, you answer those first and then

you move to the hard problem, right? So not all problems are the same.

It's going to take you a different amount of time.

And probably the hard problems, which are the ones that you see at the end, most

quizzes or assignments, are going to take you more time to answer than the first

problems you do. Not, not, every problem is not the same.

and then astronomy, we're going to keep that general idea,

but it's, I'm going to say that it generally takes you longer, right? So it

takes you 10 minutes to answer the first problem, 15 minutes to answer the second

problem, 20 to answer the third and 25 to answer the fourth one I'm going to say

that, I'm going to assume that astronomy is a hypothetical example, that is

astronomy is harder than economics. I sort of think that's the case, but

that's just for the example, for the sake of the example let's say that.

Now, let's say that you're deciding right now, which, which answer, which problem

to answer next, you have a choice. You can spend your, your next few minutes

answering astronomy or you can answer economics.

And the question is with the information I'm giving you here, which, which one

will be the best decision for you? To, to, answer an, an astronomy problem or to

answer an economics problem? Alright, if you answer the astronomy problems, the

opportunity cost of answering those problems will be the economics problems

you won't be able to answer. And if you answer an economics problem,

the oppurtunity cost of that will be the astronomy problems you won't be able to

answer. So I want you to take a moment and think

about that problem. You have the table, which, what would be the best economic

decision that you should do? Should you answer an economic problem or should you

answer an astronomy problem? Okay, so what's the answer? Well, I think

the answer is, you can't answer, right? Because you don't have all the

information. Let me explain to you why.

A lot of you will actually simply say, well you're a lot better of answering

astronomy, I mean answering economics in general, in takes you about, on average,

it takes you about 30 minutes to answer an economic problem and on average, it

takes you a lot more to answer an astronomy problem.

So perhaps a lot of you said that you should answer an economics problem,

because it takes you less, right? So you give up less, right?

but actually, that's not the case, because each problem takes you different

time. And if you don't know where you are right

now, right? That the, the, the principle, say that is the value on the costs of the

minutes of your next action, not the average action, right? So suppose that,

at the moment, you had actually already answered three problems in, in economics,

and you have not answered any problems in astronomy.