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2 July, 07:21

Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time. In less than a week she discovered that the shoes were uncomfortable. Grace went back to wearing her old pair and stashed away the new pair. When asked by her boss, Mme. Ramotswe why does she not simply give away the new pair, she said: "But I paid so much for them." Grace's behavior:

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  1. 2 July, 10:38
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    The correct answer is: Ignores the purchase price is now a sunk cost.

    Explanation:

    A sunk cost can be understood as money that has already been spent and therefore it is impossible to recover it. In other words, sunk costs are unrecoverable costs.

    It is a concept widely used in the economy, microeconomics, and business.

    It is also known as retrospective cost.

    In conclusion, a sunk cost is a sum of money that was paid in the past and doesn't have any relevance in the present moment or the future.

    In this particular case, Grace's behavior indicates that she is ignoring the fact that the purchase price of the pair of shoes is now a sunk cost.
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