Assume a can of Arizona costs $.99.
Average movie ticket price in the U.S. is $8.61.
Ride Along 2 costs $13.39 in Harlem. ↩
opportunity cost is the best alternative sacrificed for a chosen alternative.
It is the cost of
not choosing the
next best alternative. In every economic decision, some highly valued opportunity must be sacrificed. The actual good or use of time given up for the chosen good or use of time measures the opportunity cost.
To personalize the relationship between time and
opportunity cost, ask yourself what you would be doing if you were not reading this lesson. Your answer might be watching TV or sleeping. If sleeping is your choice, the opportunity cost of this lesson is the sleep you sacrifice.
Note that the cost is
NOT watching TV
opportunity cost is the value of best option you give up, not everything that you have to give up.
For me, the
opportunity cost of creating this lesson was watching the Oscars.
College is expensive these days. Yet, most universities argue an undergraduate education is actually worth much more than what students pay for it. Clearly there is an emotional logic to this argument. But what do the numbers tell us?
In today's episode, Planet Money takes a behind the scenes look at Duke's costs and considers the university's case that $60,000 a year is actually a discount.
HTMLfor these questions.
Explain why scarcity leads to
opportunity cost. Give an example from your own life.
Suppose a advertises a "free car" contest. Is this car free because the winner pays zero for it?