Let's Go Out to Dinner!

What are the benefits and costs associated with going out to dinner with a friend?

What do the terms benefit and cost mean?

Benefits and Costs of Going Out to Dinner

When considering whether to go out to dinner at a restaurant with a friend, it's important to take into account the benefits and costs associated with the decision.

Cost-benefit analysis involves calculating the costs and benefits of a decision to determine its overall advantage. In this case, Jia is faced with the cost of the meal, tip, and transportation, as well as the benefits of enjoying her friend's company.

Understanding Cost and Benefit

In a cost-benefit analysis, the costs and benefits of a decision are compared to assess the net gains or losses. It helps in evaluating whether the benefits outweigh the costs or vice versa.

Importance of Cost and Benefit

Businesses often utilize cost-benefit analysis to make informed decisions by weighing the advantages and disadvantages of various options. By identifying and projecting both explicit and implicit costs and benefits, leaders can make strategic choices.

Calculating Jia's Benefits

In Jia's case, the benefits of going out to dinner with her friend include the value she places on the meal ($25), the enjoyment of spending an evening with her friend ($30), and the cost she would incur if eating at home ($8).

Total Benefit = $25 + $30 + $8 = $63

Therefore, Jia's profit associated with going out to dinner with her friend is $63.