How to Make Decisions Using Cost-Benefit Analysis

Miacademy & MiaPrep Learning Channel

This video introduces students to the economic concept of Cost-Benefit Analysis, moving beyond simple decision-making methods like coin flipping or basic pro-con lists. The host explains that while small choices might not require deep thought, significant life decisions carry consequences that demand a structured approach. Viewers learn that Cost-Benefit Analysis involves comparing what is gained against what is given up (including opportunity costs) to determine the most logical course of action. The core of the video breaks down the process into five distinct steps: identifying the decision, listing all costs and benefits, assigning a numerical value to each factor based on personal importance, comparing the totals, and making a final decision. To make this abstract concept concrete, the host walks through a relatable example of a student deciding whether to take a part-time job, weighing factors like earning money against losing free time and study hours. Finally, the lesson expands the scope of the concept to show its real-world relevance beyond personal choices. It explains how businesses use this analysis for production and pricing strategies, and how governments rely on it for setting taxes, interest rates, and regulations. This connects the personal skill of decision-making to macro-level economic policies, helping students understand how major societal decisions are calculated.