Sunday, October 9, 2011

Opportunity Cost

Understanding the concept that everything has an associated cost throughout life at first is a little unnerving. But it is essential as economists learn more about the costs for any individual to any given situation. A common example would be a simple drug dealer. Now separating the thought that this man or woman is not in anyway related to a drug gang, any sort of violence, etc. And was just a normal business getting by. Although his/her opportunity cost is getting caught and serving a very lengthy prison sentence, the reward is too great to pass up.

Comparatively to the baker with his/her business on main street who sells baked goods for a reasonable price and yet because of the shortage of customers has a much harder time trying to get by as the revenue from the shop would be less impressive (most likely) than the drug dealer. Although they both share the opportunity cost of their time and effort the drug dealer has a higher risk/reward to contemplate.

As the business owners above I too have to make the opportunity cost of going to college and weighing out the risk/reward to fing if it would be worth my time and effort to go as well. As with my first blog post the same costs go into these different fields of study depending on your relation with them. Doing something that pays very well (the drug dealer) but can make you very unhappy can make that decision a too big of an opportunity cost to invest in then the reward that follows it. But finding the balance between love/hate of work and low/high salary should efficiently influence the choice to go into the right major, yet this isn't always that simple as there are numerous costs with every action we all make.

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