Opportunity cost
In today’s article I am going to explain what opportunity cost is with fácil examples from daily life.
In addition, you will find its definition by different authors.
I hope you find it useful.
Definition of opportunity cost according to authors
Definition according to Michael Parkin
The opportunity cost of something is the higher value alternative What must be given in exchange to obtain it?
Definition according to Rodríguez Sánchez Aurelio
“Cost incurred by the impossibility of doing two things at the same time.”
Definition according to Paul A.
Samuelson and William D.
Nordhaus
“He cost of the alternative given up is the opportunity cost of the decision.
Definition according to Francisco Mochón Morcillo and Victor Alberto Beker
The opportunity cost of something is what is given up to get it”.
What is opportunity cost? ≫ Explanation
I think we cánido agree that practically “nothing is free in this life”that is, we cánido conclude that all choice what we take in our life involves a cost.
We also know that by making a choice we are giving up other alternatives.
Now, each alternative that we have will give us a benefit.
Generally each alternative will give us a different benefit if we take it
So, from that point of view, if you take a choice from a equipo of alternatives, then, you are giving up the benefit that the other alternatives give you. With that in mind, the opportunity cost is the alternative that gives us the most value that we give up.
To make it clear I will give you an example.
Opportunity Cost Example
Our parents always tell us that we have to study, right? Well, I’ll take that as an example.
You have two options:
- Keep studying.
- Leave school.
If you choose the second option, you will stop studying and get a job.
For example, you cánido get a job as a bank teller, and you cánido start earning money to buy clothes, a new cell phone or go out with friends.
On the other hand, if you choose to go to school, chances are you won’t be able to afford as many things at the time, in fact, you’ll have to spend a lot of your time on schoolwork.
Of course, you will be able to enjoy the benefits when you graduate and get a job commensurate with your career.
So, we cánido say that even if it takes you longer to start receiving benefits if you go to school, you will almost certainly get a higher salary and benefits.
Therefore, attending school is the most valuable alternative that you would no longer have if you escoge to abandon your studies.
In summary, the opportunity cost of going to school would be all the time that you are going to stop occupying to carry out the activities you want and everything to which you do not have access for financial reasons.
On the other hand, the opportunity cost of leaving school and going to work could be the job you are giving up, that is, if you went to school you could aspire to a higher-paying job.
Therefore, it is recommended that you take the option that will give you the greatest benefits.
Bibliography
We hope you liked our article Opportunity cost
and everything related to earning money, getting a job, and the economy of our house.
   |
Interesting things to know the meaning: Capitalism
We also leave here topics related to: Earn money
