Opportunity cost is a value or profit of something that is forgone to acquire something else. It is closely related to trade-offs and is a notion inherent in almost every decision of investing and of daily life. It is the central concept of economic science that expresses the basic relationship between scarcity and choice and is considered to be the greatest contribution of the early neoclassical period (Thornton, 2007). Accordingly, it is one of the keys to making better financial decisions and is used in computing cost-benefit analysis of a project where those costs are not generally considered in account books but are recognized in decision making.
Similarly, the opportunity cost is a factor in production decision, consumer decision, time management, capital allocation and lifestyle choices. Kevin Stewart, the founder of "calculate my wealth” said that the idea behind opportunity cost is that the money we spend a present moment on a consumer product could have been invested and put to work on our behalf (Marquit, 2015).
Now let’s examine the opportunity cost in my daily and practical life. Before joining MBA class in King’s college after finishing my bachelor’s degree I had two option that is either to continue my study in Nepal by joining Nepal’s MBA college or go to Australia for further study. But I had to sacrifice the abroad study because I had to take care of my father and mother here in Nepal. Thus I stayed in Nepal and joined MBA at kings instead of going abroad for study and work. Through this practical illustration, I want to exemplify how the opportunity cost was considered in my decision making. I want to make clear that If I had gone to Australia then I would have got new life, best standard life, world-class study and so on which is taken as a beneficial point for me but I gave up this beneficial choice later. Thus for me, the abroad study choice is the opportunity cost for me.
In conclusion, the opportunity cost is linked to the notion where our every decision require a trade-off where we have to analyze what we are gaining and what we may be giving up.
References
Marquit, M. (2015, Jun 10). Understanding Opportunity Cost: How $200 Sneakers Could Cost You $75,000. The Huffington Post .
Thornton, M. (2007). Richard Cantillon and the Discovery of Opportunity Cost. History of Political Economy, 39 (1), 97-119.
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Opportunity cost is a value or profit of something that is forgone to acquire something else. It is closely related to trade-offs and is a notion inherent in almost every decision of investing and of daily life. It is the central concept of economic science that expresses the basic relationship between scarcity and choice and is considered to be the greatest contribution of the early neoclassical period (Thornton, 2007). Accordingly, it is one of the keys to making better financial decisions and is used in computing cost-benefit analysis of a project where those costs are not generally considered in account books but are recognized in decision making.
Similarly, the opportunity cost is a factor in production decision, consumer decision, time management, capital allocation and lifestyle choices. Kevin Stewart, the founder of "calculate my wealth” said that the idea behind opportunity cost is that the money we spend a present moment on a consumer product could have been invested and put to work on our behalf (Marquit, 2015).
Now let’s examine the opportunity cost in my daily and practical life. Before joining MBA class in King’s college after finishing my bachelor’s degree I had two option that is either to continue my study in Nepal by joining Nepal’s MBA college or go to Australia for further study. But I had to sacrifice the abroad study because I had to take care of my father and mother here in Nepal. Thus I stayed in Nepal and joined MBA at kings instead of going abroad for study and work. Through this practical illustration, I want to exemplify how the opportunity cost was considered in my decision making. I want to make clear that If I had gone to Australia then I would have got new life, best standard life, world-class study and so on which is taken as a beneficial point for me but I gave up this beneficial choice later. Thus for me, the abroad study choice is the opportunity cost for me.
In conclusion, the opportunity cost is linked to the notion where our every decision require a trade-off where we have to analyze what we are gaining and what we may be giving up.
References
Marquit, M. (2015, Jun 10). Understanding Opportunity Cost: How $200 Sneakers Could Cost You $75,000. The Huffington Post .
Thornton, M. (2007). Richard Cantillon and the Discovery of Opportunity Cost. History of Political Economy, 39 (1), 97-119.