POSITIVE

AND
NEGATIVE
Framework in Understanding
Decisions Using Economic
Analysis
Decision Making
• Influenced by motivation
• Additional level of
satisfaction
• Compare the benefits
derived and the costs
incurred
 Maximum Net Benefit
MARGINAL BENEFIT = MARGINAL Optimal
COST Decision

surplus, net satisfaction, sacrificed money, time,

net returns, net profit resources, goods and
activities
EXPLICIT BENEFIT AND COST
• Obvious or easily recognized

IMPLICIT BENEFIT AND COST

• Hidden

RECOGNITION
(Benefits and Costs)
 Issues of Recognition
Spatial Dimensions Temporal Dimensions

Lack of awareness Lack of awareness

due to the status of dictated by the Proximity
the decision makers in terms of Time
(Present and Future)
 Issues of Valuation
Spatial Dimensions Temporal Dimensions

Different valuation of The Present is more

social impacts significant and
valuable than the
future
DISCOUNT RATE
• Is a rate which a stream of future values is reduced
to make them comparable with present values.

FUTURE PRESENT
VALUES VALUES
 FUTURE DISCOUNT
BENEFITS RATE

√
  FUTURE DISCOUNT
BENEFITS RATE

FUTURE DISCOUNT
COSTS RATE

√
  FUTURE DISCOUNT
COSTS RATE