How does a person's choice relate to his or her opportunity cost?
When a person chooses one action, s/he gives up another action.
You choose to spend the evening on Facebook? You give up your opportunity to do a good job on your homework.
You choose to date Rob and not Roy? You give up the opportunity to get to know Roy.
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A person's choice directly relates to his or her opportunity cost. To understand this concept, we need to define what opportunity cost is. Opportunity cost refers to the value of the next best alternative that is forgone or sacrificed when making a choice.
When a person makes a decision, they commit to a certain course of action while simultaneously giving up other alternatives. These forgone alternatives represent the opportunity cost. The opportunity cost of a choice is essentially the benefits or opportunities that could have been gained if the alternative decision was chosen instead.
For instance, let's say you have two options for how to spend your evening: studying for an important exam or going out with friends. If you choose to study, your opportunity cost would be the enjoyment and social interaction you would have gained from going out with friends. On the other hand, if you choose to go out with friends, the opportunity cost would be the knowledge and preparation you would have gained from studying.
So, when a person makes a choice, they must consider the opportunity cost associated with each alternative and weigh the benefits and drawbacks of each option. By evaluating the opportunity cost, individuals can make informed decisions that align with their priorities and values.