In life you cannot avoid making decisions, maybe a simple or one that could change your life. I myself experienced this situation before and I know that won't be the last one. Now, you're thinking is this somewhat related to economy?? I SAY YES. In everyday life, without realizing we're applying some of the economic concepts.
A good example of economic concepts we often use:
As we all know human wants are unlimited but the resources are limited. You might say , '' I'm contented with what I have.'' There's more than that to it. Wants are not limited to material things. It could be other things such as time. You often hear people say '' I don't have much time''. You desire for more time, but you don't have enough. In this context, time is the resource. You're facing scarcity. Scarcity arises when people desire more things than available resources can provide.
As we all know human wants are unlimited but the resources are limited. You might say , '' I'm contented with what I have.'' There's more than that to it. Wants are not limited to material things. It could be other things such as time. You often hear people say '' I don't have much time''. You desire for more time, but you don't have enough. In this context, time is the resource. You're facing scarcity. Scarcity arises when people desire more things than available resources can provide.
Then you have to make a choice. As a rational human being of course you would want to make the best choice. If you are an individual you'll make your choice based on ones that will maximise your satisfaction or if you are a firm of course your choice will be based on which one will maximise your profits.
Let say your choice is between A and B, and then you decided to choose A. B will be your opportunity cost. An Opportunity cost is the value that you have to forgo in order to make one particular choice instead of another.
The explanations above are all based on theories. How is it related to you in real life?? Let me give a simple real life example:
You don't have enough TIME to study for your exam. The only time you have is during the night, but you also want to sleep (Scarcity). You have to make a CHOICE, whether to STUDY or to SLEEP. If you choose to STUDY, your opportunity cost is your SLEEP and if you choose to SLEEP, your opportunity cost is your STUDY.
A simple concepts, yet applicable to our daily lives. You can watch the video if you want to know more about the theory part in details:
-Nur-Izzati Zahirah Binti Che Ibrahim
can you give more example of opportunity cost??
ReplyDeleteLet say you have RM100 in your hand. You want to buy a watch and also a T-shirt but your money is only enough for one. You're facing scarcity of money. Then you have to make a choice between a watch and a T-shirt. Whichever you let go to obtain the other one is the opportunity cost. I hope this explanation briefs you well.
DeleteHave a nice Day :D
I don't know if it help them, but it sure helped me. Thank you
DeleteEvery choice we make will cost something. So we have to evaluate which cost lest and benefit us later on base on time and need. However, there is always a way to reduce the cost from our choices.
ReplyDeleteIt is easy to make decision when we can value in terms of monetary but many decisions involve values which are personal to someone and can mean nothing to another.
DeleteThanks for such a nice explanation
ReplyDeleteGood info, thanks!
ReplyDeleteGood info, thanks!
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