Opportunity Cost

Topics: Economics, Price, Costs Pages: 3 (1142 words) Published: October 10, 2012
Opportunity cost
Have you ever been in the situation deciding which cloth to buy? Have you ever facing the dilemma of to study or to play? Have you ever consider as a seller and choose to lower the price or raise it? In the field of economics, here’s a solution for you. The magic word is “opportunity cost”. Opportunity cost in terms of economy is the highest-value alternative one has to give up to engage in an activity. In other words, using the same resources such as money and time, the best outcome besides the one that one chooses is the opportunity. Like a price one has to pay to buy goods and services, opportunity also has its own price. It’s not always in forms of money though; it could be reward form a competition, an earning from other activity, or even the feeling of satisfaction. Using this thinking process helps people see through the clouds of other factors and make rational decisions. The idea of Opportunity cost is so close to our daily life that sometimes we don’t even notice. To interpreter the conception, we can use the classic example, guns versus butter. Say a nation has limited resources and can produce butter only, guns only, or any combination of both. In order to produce one more unit of butter, a certain amount of guns has to be given up, vice versa. The opportunity cost of a unity of butter is that certain amount of guns that has been given up. In the example, guns represent the national defense while butter stands for civil goods. It’s a dilemma that facing by any nation in the world. Not only the big event like national budget, but also small daily activity like shopping for goods involved in opportunity cost. For example, a mid-class housewife is shopping online on walmart.com deciding between normal vegies and organic vegies. On the one hand, vegies is cheaper by couple dollars for each item while the whole family has to take the risk of catching disease from the overused pesticide; on the other hand, the organic vegies cost 20%...
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