What is your opportunity cost of attending college?
Guell (2015), in their book Issues in Economics Today, the opportunity cost is a choice or alternative for selecting the best option. In other words, it is basically the alternative we are giving up for the decision we have made. The decision I made, what I would have done if I did not make that decision and instead what I would be making out. For instance, if someone asks me what is the opportunity cost of riding Honda CB Unicorn 160 then I would respond saying bike engine specifications, features, mileage, and re-sell value which I could probably get into other options.
Now, let’s scrutinize the concept of opportunity cost practically in the setting of my present choice regarding attending the college. Prior attending the college and pursuing my MBA degree (Master of Business Administration) I had other valuable or best alternatives which are now forgone. The dominant underlying choices for me were starting my business venture, going overseas for further studies and pursuing MBA in Nepal (right now in which I am committed to). These were the opportunities which I conceived predominantly and thought of insuring them.
However, it was quite obvious that I cannot have all of these choices (i.e. own business venture, going abroad for further studies and pursuing MBA in Nepal) and out of these best alternative I had to select the most liable and optimum (best) option to acquire my future endeavour. In that class, I evaluated each of the valuable choices thoroughly and made my decision to pursue MBA degree in Nepal and forfeited other alternatives. It implies that I passed up another two opportunities from which I could have gained. Thus, these foregone alternatives or choices of mine are an opportunity cost for me.
Guell, Robert C. (2015). Issues in Economics Today , 7th edition- 2015 ISBN: 978-0078021817
Opportunity cost is a value or profit of something that is forgone to acquire something else. It is closely related to trade-offs and is a notion inherent in almost every decision of investing and of daily life. It is the central concept of economic science that expresses the basic relationship between scarcity and choice and is considered to be the greatest contribution of the early neoclassical period (Thornton, 2007). Accordingly, it is one of the keys to making better financial decisions and is used in computing cost-benefit analysis of a project where those costs are not generally considered in account books but are recognized in decision making.
Similarly, the opportunity cost is a factor in production decision, consumer decision, time management, capital allocation and lifestyle choices. Kevin Stewart, the founder of "calculate my wealth” said that the idea behind opportunity cost is that the money we spend a present moment on a consumer product could have been invested and put to work on our behalf (Marquit, 2015).
Now let’s examine the opportunity cost in my daily and practical life. Before joining MBA class in King’s college after finishing my bachelor’s degree I had two option that is either to continue my study in Nepal by joining Nepal’s MBA college or go to Australia for further study. But I had to sacrifice the abroad study because I had to take care of my father and mother here in Nepal. Thus I stayed in Nepal and joined MBA at kings instead of going abroad for study and work. Through this practical illustration, I want to exemplify how the opportunity cost was considered in my decision making. I want to make clear that If I had gone to Australia then I would have got new life, best standard life, world-class study and so on which is taken as a beneficial point for me but I gave up this beneficial choice later. Thus for me, the abroad study choice is the opportunity cost for me.
In conclusion, the opportunity cost is linked to the notion where our every decision require a trade-off where we have to analyze what we are gaining and what we may be giving up.
Marquit, M. (2015, Jun 10). Understanding Opportunity Cost: How $200 Sneakers Could Cost You $75,000. The Huffington Post .
Thornton, M. (2007). Richard Cantillon and the Discovery of Opportunity Cost. History of Political Economy, 39 (1), 97-119.