Investment Losses

noaut0grafs asked:


2 questions!
1. From society’s point of view the economic function of profits and losses is to …??

2. Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, “At least I didn’t lose any money on my financial investment.” His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist’s analysis in this case incorporates the idea of… what?

WADE