This topic hits close to heart. I’ve taken an economics course, and anyone who has taken one as well, knows how it feels to walk out of class after learning about opportunity cost. It’s mind boggling, eye-opening and rewires your thinking about your actions. Wait, actions?Well, for those of you who assume economics is a branch of finance or money, it’s actually not; in many aspects, economics is defined as the study of choices.
Opportunity Cost is the value of the next best alternative that is forgone when making a decision. Now the value is not limited to money. The value could be time or effort or so many other things. Picture this. You have a test tomorrow and you have a party today. If you choose to study, you are forgoing your joy of attending the party. If you go to the party, you forgo the preparedness you would either have by studying for the test.
The term was first researched by classical economists like Adam Smith and David Ricardo, but the term was coined and made popular by Friedrich von Wieser. Now, you may be asking, does Opportunity Cost apply everywhere to every decision? The answer is yes; there has not been a single real scenario where opportunity cost doesn’t exist.
So, next time you make a decision, do consider the opportunity costs.
RELATED POSTS
View all
