Pam and Jim are getting wed, however a few of their colleagues aren’t all set to provide cash straight. Ryan approaches Pam and provides her the option of $100 now or the chance to get $5,000 a year from now. Pam is doubtful and at first specifies she desires the $100. Ryan has the ability to ultimately talk her into buying his pal’s business.

This is a fantastic chance to discuss the tradeoffs of danger and benefit in addition to present the idea of present worth. If Pam accepted the $100, she might have the ability to turn that into $110 next year if she discovered a chance to invest at 10% interest. Ryan is using an exceptionally dangerous option that would settle much greater. In order for individuals to accept that much danger, the benefit needs to be actually big. More secure financial investments tend to have lower rate of interest.

Thanks to Allison Anthony for the clip suggestion. You can discover more economics-inspired clips from The Workplace on The Economics of The Workplace site