If a family decides to spend their savings on a vacation instead of investing in a home, what economic principle are they demonstrating?

When a family chooses to spend their savings on a vacation instead of investing in a home, they are demonstrating the principle of opportunity cost. Opportunity cost is the idea that when you choose one option, you give up the benefits of another option. In this case, by spending money on a vacation, the family is forgoing the potential future benefits of owning a home, like building equity or having a stable place to live. For example, if the family spends $5,000 on a vacation, they miss out on the chance to use that money for a down payment on a house that could appreciate in value over time. This decision shows how families weigh their choices based on what they value more at that moment.