RATIONAL DECISION MAKING

Applied to spending and saving

Cost/Benefit AnalysisAlternatives Possible

CostsPossibleBenefits

P.A.C.E.D. P Problem – Identify the alternatives A Alternatives- Identify alternatives C Criteria- What do you want to

happen? E Examine- How do the alternatives

fit your criteria?

D Decision- choose an alternative.

Situation 1 cost/benefit analysis It’s two years from now, and you are in college. The

cable bill is in your name. You plan to go to the beach with your friends for spring break in two weeks. The trip will cost $250 dollars. You are driving your car, so you take it to get an oil change two weeks before the trip. The mechanic changing your oil discovers that you need a tune up, and new breaks. He tells you that a dangerous wreck could occur without these services. The cost is $250. Lately you have been so caught up saving for the trip you forgot to pay the cable bill the last two months. The next day you get a notice from the cable company saying if you do not pay $250 immediately your cable will be cut off. Use a cost/benefit analysis to determine what you will do.

Situation 2 P.A.C.E.D. You are finishing your fist semester of college.

Christmas break is coming up, and your family is very excited about the fact that you promised to come home the entire two weeks. The last day of finals, your roommate tells you that their family is going on a skiing trip the first week of break, and invites you along. It will cost ½ of the money you saved to buy your family Christmas gifts to switch your flight. Use the P.A.C.E.D model to decide what to do in this situation.