Economics and Opportunity Cost

Topics: Economics, Costs, Marginal concepts Pages: 3 (995 words) Published: March 12, 2014
The Cost of Something
Mankiw's Ten Principles of Economics
Opportunity cost is the value of the next best alternative in a decision. Imagine that you have $150 to see a concert. You can either see "Hot Stuff" or you can see "Good Times Band." Assume that you value Hot Stuff's concert at $225 and Good Times' concert at $150. Both concerts cost $150 per ticket, but it would take you a couple of hours to drive to Hot Stuff's concert and you have to be in school (the next) morning for an exam. Good Times' concert is right here in town. Explain how you would assess the opportunity cost of seeing Good Times in concert. What is the opportunity cost of going to Good Times' concert?

Develop a response that includes examples and evidence to support your ideas, and which clearly communicates the required message to your audience. Organize your response in a clear and logical manner as appropriate for the genre of writing. Use well-structured sentences, audience-appropriate language, and correct conventions of standard American English.

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People face trade-offs daily. As humans, we make decisions that require trading off one action against another [Principle of Microeconomics. 2012. 4]. The process of giving up something we enjoy in order to gain another good has been part of our human characteristics from day one. As a society, we should make good decisions only if we understand that there are other available options that will benefit us [Principle of Microeconomics. 2012. 5]. By definition, opportunity cost is the cost of an alternative action that must be forgone in order to pursue a certain action. Opportunity cost is present anytime we must make choices. As rational thinkers, we prefer to choose actions that will not only maximize our time, but also benefits our future.

Let us imagine this particular scenario…

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