From the name of this book, we know that the content is about some economic phenomena in life.

The author of this book is a professor at Cornell University named Robert Frank.

The professor's teaching method is very special. He asks students to write down the economic phenomena they think and see, that is, those economic phenomena that may be commonplace in life, but others have not noticed them.

After writing it down, analyze it with the method of economics. If the students write well, they can be praised.

The content of this book comes from the better essays written by students. Of course, the professor has revised them himself, and some articles have been written by the professor himself.

Therefore, the whole book, as we know, is about using economic principles and methods to explain various phenomena in life, so it is particularly easy to read.

When you read it, you feel happy and relaxed. When you read it, you will make a sound like "Oh", because there are indeed many things that we think are normal in life, and actually there are economic principles behind them.

Through this book, you can use some familiar things in our life to understand those seemingly abstruse economic principles.

I regret that I didn't come across this book earlier. I studied economics in college. At that time, the professor really liked to talk about charts or tell you some cases in books. It sounded boring, especially when I heard macroeconomics.

This book is very interesting. I think it is an introductory reading. After reading it, you will find that economics is very practical. The original principles of economics are not so boring. It is combined with life. After reading it, you may be more interested in economics.

The structure of this book is like this. In the introduction, two core concepts are introduced, which are particularly important in the whole field of economics. One is called opportunity cost, and the other is called cost-benefit principle.

So our main content today is to introduce these two concepts. In the future, I will introduce the economic principle to you every day, and cooperate with some examples to talk about it.

Let's take a look at this pair of concepts that need to be understood today, opportunity cost and cost-effectiveness principle.

1. opportunity cost

First of all, what is opportunity cost?

I believe everyone who has studied economics knows this word, but not everyone understands it.

Let's give an example.

You don't know what luck you took, and you won a free ticket for a concert in Jay Chou. At the same time, TFBOYS was also giving a concert.

Two concerts crashed. Jay Chou is the eternal king of songs in the minds of the post-90s generation, and TFBOYS is the most popular idol of the new generation. So after watching this, we can't watch that. Which one should we go to see?

Note that Jay Chou's concert is free, but TFBOYS' concert costs money, which costs 400 yuan.

Because you like TFBOYS too much, in fact, your psychological bearing price for this concert is 500 yuan.

In other words, as long as it doesn't cost more than 500 yuan, you will find it worthwhile. If you want to see it, but if it costs more than 500 yuan, you will feel that you don't want to see it.

It seems that my example is a bit inappropriate. I don't watch it if it exceeds 500 yuan, and I don't like TFBOYS much. But you can make do with it. This is an example.

In this example, you especially like TFBOYS, but you don't want to watch it if it costs more than 500 yuan, even if you have nothing to do.

So, what is the opportunity cost if you choose to go to a free concert in Jay Chou?

Note that there is no other cost for you to go to the concert, and we don't count the transportation cost, so the only thing you sacrificed when you went to Jay Chou's concert was that you couldn't go to TFBOYS' concert.

Many people know the definition of opportunity cost more or less. Opportunity cost is the value of other things you give up in order to do this.

So in this question, what is the opportunity cost of going to Jay Chou concert?

A, 0 yuan

B, 100

C, 400 yuan

D, 500 yuan

Which is the correct answer? Think it over in your own mind first.

After this question came out, I found that many students majoring in economics did not really understand what opportunity cost is, and professors sometimes chose this question incorrectly.

An interesting conclusion is that if you haven't studied economics, you have a higher probability of getting the right answer than if you have studied economics.

But whether you have studied or not, the probability of choosing the right one is less than that of being blind.

So you see, in fact, many people don't understand the real concept of opportunity cost. The correct answer to this question is 100 yuan.

In other words, if you don't go to the TFBOYS concert, the value you sacrifice is 100.

How did this 100 block come from? If we don't watch TFBOYS' concert, we will miss a performance worth 500 yuan for us, because I won't watch it after 500 yuan, so the value of this concert in my mind is 500 yuan.

Although I missed the 500-yuan concert, I also saved the 400 yuan I had to pay for the concert. ?

So I don't go to the TFBOYS concert, and the value I give up is 500 -400 = 100.

If you think it's worth at least 100 yuan to watch TFBOYS' concert, you should go to see it, and don't take a free ticket to see Jay Chou.

If you don't think the three-hour concert is worth 100, you should go to see the free Jay Chou.

I know many people are already confused when they hear this. Why is it 100?

Draw a picture in your notebook, and think about this sentence, that is, "I didn't go to the TFBOYS concert, so I lost a concert worth 500 yuan for me, and saved 400 yuan for actually buying this ticket, so I didn't go to his concert, and the value I sacrificed and gave up was actually 100 yuan."

Think this sentence over and over again, and you will understand. Therefore, this is a concept of opportunity cost, which is better understood by combining some examples in life.

When you encounter other examples in the future, you can just go up and see what the opportunity cost is.

And after learning this opportunity cost, I can understand some phenomena in life.

I found that since I started the company, I have been anxious to talk to others. Why do I talk to my employees and my family faster? Sometimes I feel particularly impatient, and occasionally I try to control it.

It is because the opportunity cost of my speech is too high, and my time is precious and valuable. I have paid a great opportunity cost for chatting here for one minute, so I don't like chatting.

Also, you will find that in a big city like Beishangguangshen and Shenzhen, the speed of everyone's speech is either speed or rhythm, which is faster than that of those friends in the countryside, and the pace of walking is faster. Why?

Because they spend a lot of time and opportunity on talking and walking.

Now we can understand.

2. Cost-effectiveness principle

Further down, let's look at another economic concept, which is called the cost-benefit principle.

This concept is the source of all economic concepts, which means that only when the extra benefits brought by an action are greater than the extra costs should we do it.

A very simple concept, if we do one thing, the extra income it brings is not as big as the cost, I will lose, and I certainly don't want to do such a thing again.

It's easy to understand, but if you use it in life, it's not so easy. In life, we don't seem to be as rational as we think, and we can use this cost-effectiveness principle to measure what happens around us.

Let's take an example, buy an alarm clock at the convenience store in front of our house, and the price is 20 yuan.

But a friend told you: "The same alarm clock, there is a supermarket in the suburbs that only sells 10 yuan."

Will you go to the suburbs to buy a ten-dollar alarm clock, or just buy it at your door? Note that no matter where you buy it, this alarm clock can be guaranteed all over the country at any time.

Of course, there is no absolutely right or wrong answer, but most people will actually choose to go to the suburban supermarket to buy an alarm clock, because in his view, I saved half the money by going to the suburbs.

Let's look at the next question. If we buy a laptop at the school gate, the price is 25 10 yuan. If we buy the same computer in a suburban supermarket, we need to pay 2,500 yuan. No matter where you are, you can guarantee the problem anytime and anywhere in the country.

There are more people who choose where to buy this time. Most people will choose to buy it at the school gate, because in his view, a 2500-yuan thing can't run so far to save 10 yuan, which seems to be nothing to the 2500 yuan.

This is the choice of most of us, but let's think about the cost-effectiveness. If we are a rational person, we should make exactly the same choice in these two questions, because the money saved in these two questions is the same.

Why are our choices different? You see, our choice is actually not as rational as we think.

3. The principle of cost-effectiveness in product design

Let's take a look at the cost-effectiveness principle in product design.

To tell the truth, it is really difficult for us to make decisions sometimes.

For example, when we made a new course, I said to my colleagues, "Can we add this service to this course, and can we add that service?"

I have many ideas, which can make this course better and better, and become an excellent course.

My colleague will give me a feedback, and he said, "You can't add this action."

I said, "Why?"

"Because the cost of adding this action is too high, we can't cover our cost by adding such an action. The more we do, the more we lose money."

In fact, he is rational and right, because in general, a rational manufacturer has no incentive to add new functions to a product, unless the product value and income brought by this function outweigh the cost.

Almost all examples can show this principle. A product designed should not only meet the functions imagined by consumers, but also meet the needs of sellers to keep the price low and facilitate competition.

In other words, product design must achieve a balance between the two, which is why you use a mobile phone or a computer in your life, and you think, "It would be more convenient to add a fingerprint touchpad."

So the manufacturer is so stupid that he doesn't add it? Because after he added it, the cost was too high and the income could not be recovered at all.

Let's take a look at the evolution of the automobile, and we can better understand how the cost-effectiveness principle works in it and how it affects the product design.

In the earliest days, there was no heater in a car. We can't imagine a car without air conditioning now, but in the early days, there was no air conditioning and no heater, and it was very cold for everyone to sit in the car.

However, many buyers would rather give up the temperature in exchange for a lower price, because if a manufacturer sells a car with a heater inside, the cost will become higher, and it may not be as popular as those cheap models without a heater when they are sold in the market.

However, as people's income is getting higher and higher, few people are willing to endure sitting in a cold car in winter, and such consumers are gradually decreasing.

Therefore, when the demand for models without heaters is reduced to a certain limit, dealers are not willing to sell such models any more, and almost all models have heaters in them.

At that time, the model cost was indeed higher and the fuel consumption was also high, but it didn't matter. At that time, the oil price was very cheap.

Then in the 1970s, the Arabs started an oil embargo, which the Arabs hated. He found that oil was valuable and could not be sold so cheaply. He started an oil embargo, which led to an increase in oil prices.

So at that time, what was the change of the car? From an eight-cylinder engine to a six-cylinder engine, even to a four-cylinder engine. I have never seen a four-cylinder engine before, but now many models on the market have become four-cylinders.

So in short, the functions of product design are in line with the principle of cost-effectiveness.

To repeat the principle, this principle holds that only when the income is not lower than the cost should a certain function of the product be added.

This explains why in life, you will find that when you open your refrigerator freezer, there is no light inside, but there will be light inside the freezer.

Why is this happening? In fact, the cost of installing a lamp in a freezer is the same as that of installing a lamp in a freezer. Suppose the price of installing a lamp in a refrigerator is 100, and both lamps are 200.

That is to say, the production cost of the refrigerator has increased by 200 yuan, but the manufacturer chooses to install only one refrigerator, because the probability of opening the refrigerator is much greater, but the probability of opening the refrigerator is very small, so they think that it is more cost-effective to install it in the refrigerator.

Installing a lamp in the freezer has greater benefits and higher value, so installing a lamp here is more cost-effective than installing a lamp in the freezer.

Let's look at another example. Why do convenience stores that are open 24 hours a day have locks on them? Many convenience stores are open all year round. Unless there is an earthquake and riots, there will be no one in this store.

Is it because the door of the convenience store is locked that there will be no one in the store under such unexpected circumstances?

Actually, it's not. The reason why the doors of convenience stores are locked is because most doors and almost all doors in the market are locked.

Why is this happening? Because when manufacturers produce doors in batches, they are all the same and the price will be lower.

If he does one more action, such as producing an unlocked door for convenience stores, the cost will actually be high, but the income will be small, so he chooses not to do it, which is not cost-effective.

In the same way, you can analogize this principle to many places in your life. For example, there will be Braille on the ATM at the toll booth on the expressway, and most drivers are not blind. Why is there Braille?

It is because the cost of producing an ATM without Braille alone is too high.

In this way, many phenomena in life can be explained, which is the principle of cost-effectiveness in product design.