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 economist's analysis in this case incorporates the idea of opportunity costs. Opportunity cost refers to the benefits an individual foregoes by choosing one option over another. In this case, Joe chose to invest his money in gold coins instead of a bank certificate of deposit. By doing so, he missed out on the potential return of 3 percent that he could have received if he had invested in the bank certificate of deposit, which is his opportunity cost. Therefore, the economist's analysis emphasizes the importance of considering opportunity costs when making financial decisions.