What concept, rather than cost measured in dollars alone, do economists use to better evaluate a decision?
The better concept to use as a way to determine if a decision is good is the concept of opportunity cost. It tells you much more about the true value or cost of what you are doing than an actual dollar amount does.
Let us say, for example, that you are trying to decide whether to buy yourself a new sweater. You could say to yourself, “this sweater would cost me $40.” But what does that really mean? How much is $40 worth to you? This is where opportunity cost comes in. You have to ask yourself what else you could do with that $40. Let’s say that your other option would be to buy 4 Justin Bieber posters at $10 each. Now you have a true estimate of the value of the sweater. You know that it would mean giving up 4 posters.
Giving values in dollar figures can be somewhat misleading since it does not account for the actual value of those dollars to the person. It is much more important to know what the opportunity cost of a decision is if you are to make a good decision.