Let’s start by exploring this concept a bit further. Step-by-step guide on how to apply this principle any time you’re faced with a The concept of opportunity cost, explain how you can calculate it, offerĮxamples of opportunity costs that may apply to your life, and then give you a Your life means using your time wisely, which requires understanding The constraint of time is one we can’t avoid. Understanding the potential opportunities that you’re giving up by choosing one thing over another is a critical factor in making good decisions. Opportunity costs are unseen, so they can be easily overlooked if you’re not careful. Is not necessarily related to finances at all.Ĭonsidering your opportunity costs helps guide rational decision-making. Opportunity cost is not the same as what we typically think However, the opportunity cost to do so wasĭecision that requires you to make a choice between at least two options has an With my friend and give up the opportunity to earn money because seeing myįriend was more valuable to me. While I wanted to see my friend, I knew that taking a day off from work would result in lost wages. One of the choices that I struggled with recently was whether or not I should take a day off from work when a good friend was coming into town. We all make about 35,000 choices every day, which means there are a lot of things that we decide against as well. So what did you give up by passing on the other choices? Perhaps you were faced with many appealing options, but you ended up choosing the one that provided you with the most value. “ opportunity cost” is just a fancy way of saying that you have to make a trade-off decision. We all make opportunity cost decisions every single day.
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