Opportunity Cost

Scarcity of resources is the basic concept of economics. Scarcity needs trade-offs and trade-offs result in an opportunity cost.

We’ve seen during this partial opportunity cost.

The first concept of opportunity cost was made by John Stuart Mill. Opportunity cost is the other available choice to someone that picked up a choice between other ones. Any decision that involves between two or more options has an opportunity cost. For example, if someone has $20 we can buy a CD or a shirt, and if he buys the CD the shirt is the opportunity cost and vice versa.

Opportunity cost is useful when you evaluate the cost and the benefits of your choices, especially when you are between the sword and the wall. It often is expressed in non-monetary terms.

Opportunity cost has a lot of applications:

• Consumer choice
• Production possibilities
• Cost of capital
• Time management
• Career choice
• Analysis of comparative advantage

I think that it is very important to consider the opportunity cost in our lives to know the cost and the benefits of every action that we take even though it is not a monetary cost. Evaluating all the possibilities and benefits that we have we can take better decision; even though, they can be difficult

If we ignore that opportunity cost it produces the illusion that it doesn’t benefit the cost at all.