Economics and Opportunity Cost
Economics is the study of the optimal distribution of scarce resources, such as money, among numerous activities in daily human life. As a result, concessions must be made, resulting in individuals preferring certain items or services over others. The opportunity cost refers to the benefits obtained from items, activities, or services that were not chosen (McConnell, Brue, & Flynn, 2012). People make decisions based on the consideration of opportunity cost.
Rational Decision-Making and Trade-Offs
I recently purchased a high-quality smartphone. But, I had to forego purchasing other items and participating in numerous activities. Some of these goods and activities include an Xbox, designer shoes, and even taking a trip to visit my relatives. Despite sacrificing these products and activities, the purchase of the smartphone was a rational decision. A rational decision is one in which an economic agent makes a choice that results in the most preferred benefits (Herfeld, 2014). To purchase the smartphone, I considered various benefits such as: communicating with my friends and relatives, downloading academic material, streaming movies and live games, capturing pictures and videos, and even playing virtual games. Looking back, I believe my decision was rational.
The Opportunity Cost of Choosing a Course
One of the choices that I have made is taking the EC142 course. However, instead of taking this course, I would have probably sought employment in Walmart, a fast-food restaurant, a volunteer in a charity organization, or even traveling across the world. Considering the course, it might be more expensive for older students, or people such as Kobe Bryant, than younger students because the forgone benefits acquired from other activities that they can engage in are more than those gained in taking the course. Opportunity cost considerations thus play a major role in the choice making (Spiller, 2011). Kobe, therefore, will be losing millions compared to the benefits of learning economic knowledge for undertaking the course.
References
Herfeld, C. (2014). Rational choice as a toolbox for the economist: an interview with Itzhak Gilboa. Erasmus Journal for Philosophy and Economics, 7(2), 116-141.
McConnell, C., Brue, S., & Flynn, S. 2102. Microeconomics brief edition. New York: McGraw-Hill.
Spiller, S. A. (2011). Opportunity cost consideration. Journal of Consumer Research, 38(4), 595-610.
