![]() ![]() We might not consider lost studying time or $7 spent on a smoothie costly decisions, but what about bigger choices-like the decision to stretch and buy a more expensive home versus a starter home, or to spend $1,500 more on an upgraded trim package for your next car?Ĭaceres-Santamaria describes how opportunity costs are neglected even more when making higher priced purchases. The opportunity cost is an hour spent elsewhere each day. It takes 70 minutes on the train, while driving takes 40 minutes. A commuter takes the train to work instead of driving.A farmer chooses to plant wheat the opportunity cost is planting a different crop, or an alternate use of the resources (land and farm equipment).The opportunity cost is time spent studying and that money to spend on something else. A student spends three hours and $20 at the movies the night before an exam.What are some other examples of opportunity cost? “It's about thinking beyond the present and assessing alternative uses for the money-that is, not being shortsighted,” she writes. That’s why Caceres-Santamaria challenges us to consider not only explicit alternatives-the choices and costs present at the time of decision-making-but also implicit alternatives, which are “unseen” opportunity costs. Our inclination is to focus on immediate financial trade-offs, but trade-offs can involve other areas of personal or professional well-being as well-in the short and long run. What am I giving up in the future to have this now?.Instead, she suggests wearing “a unique pair of ‘economist glasses’” to see the decision differently, asking: She notes that many people would view the choice as a single one based on whether you want the drink. She uses the example of deciding to buy a $7 smoothie at the mall. This concept is what drives choices-and, by extension, costs and trade-offs, Caceres-Santamaria says. ![]() Our unlimited wants are confronted by a limited supply of goods, services, time, money and opportunities. We can’t have everything we want in life. Louis Fed, in a recent Page One Economics: Money and Missed Opportunities. “Opportunity cost is the value of the next-best alternative when a decision is made it's what is given up,” explains Andrea Caceres-Santamaria, senior economic education specialist at the St. How is opportunity cost defined in everyday life? Which stirs up the idea of opportunity cost. What do economists think about strawberry smoothies? That depends on how good the kiwi flavor is instead-plus a range of other choices. ![]()
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