Suppose your New Year resolution is to get back in shape. You are considering various ways of doing this: you can sign up for a gym membership, walk to work, take the stairs instead of the elevator, or watch your diet. How would you evaluate these options and choose an optimal one

The answer is: I would do a cost benefit analysis to try to determine which option is the best.

Explanation:

In a cost-benefit analysis you examine the pros and cons of taking an action. You estimate all the costs involved in taking that action and all the possible benefits (or profits) that you will receive by taking that action.

A company will usually perform cost benefit analysis to try to decide which investments to make. For instance, I have $1 million to invest in different projects, my cost benefit analysis should tell me in which projects I should invest that return the largest profit.

If you are trying to decide how can you lose weight more efficiently, you would first estimate the costs of each activity. How much time you are going to spend? How much you have to pay or are they free?

Then you also estimate what benefits you might get form doing each activity. How much weight can I lose by doing each one? Can I save money by doing them? Will I enjoy doing it?

After you have estimated all possible outcomes, you will be able to decide which, if any, activity or activities you should do to lose some weight.