Opportunity Cost Essay

359 WordsNov 30, 20122 Pages
Opportunity cost is commonly defined as the forgone value of the next best alternative that is not chosen. This value includes the time, satisfaction and benefits; as well as monetary cost that could have been acquired in choosing the alternative. Opportunity cost has been described as expressing the basic relationship between scarcity and choice. Resources are scarce so therefore choices have to be made. How that choice is made depends on an individual carefully analyzing the opportunity cost of each available choice. This therefore results in an individual making a rational decision. It is the concept that plays an important part in making sure that there is efficient use of scarce resources. With our resources being limited, we therefore need to ensure that they are utilized in a proper manner to ensure maximum satisfaction. Of all the possible alternatives; having all the coffee I want to drink, every morning at breakfast is the one that gives me my most desired satisfaction. My wants have therefore become Limited to drinking just coffee in the mornings. Due to the fact that I have limited myself to drinking just coffee; I have also: upon careful examination of the opportunity cost involved, decided upon the manner in which I secure my coffee each morning. Making my coffee at home verses purchasing from an outlet for a year. Our lives revolve around choices; and when we make a choice, the cost of that choice - is the other things we could have had or done if we had not made this particular choice. Instead of drinking coffee every morning at breakfast – what could I have had? * A cup of tea. * A glass of juice, either fruits or vegetables. * A glass of milk. * A glass of water even. If I had not taken the time to drink my coffee every morning – what could I have done? * Chores in and around the home. * Studying for an upcoming exam.

More about Opportunity Cost Essay

Open Document