Opportunity Cost Essay

When faced with a decision of doing either Plan A or Plan B one must evaluate the opportunity cost of each Plan. An opportunity cost is what must be given up in order to obtain some item (Mankiw 483). Specifically if you cannot accomplish both Plans, but have to choose one over the other, you would look at what you’re giving up from one in order to obtain the other. Opportunity costs are key when viewing economics, as we have to take things into consideration that may otherwise be ignored. For example when looking at the opportunity cost of a job, we must evaluate what job/salary we are giving up and forgoing in order to have the job we have.
We can break down the importance of opportunity costs by looking at the example of evaluating going to one of two concerts. The first concert is “Hot Stuff” and is valued at $225, but is a few hours away and there is an exam at school early the next morning. The second concert is “Good Times Band” and is valued at $150, but is located in town. Both concerts cost $150.
Let’s examine the first concert, “Hot Stuff” and evaluate its opportunity costs. First we have the fact that we value the concert at a much higher number than “Good Times Band,” which means are desire to see the concert is greater. The price of the ticket is also lower than the amount in which the
It is valued at the same price as the ticket, which means there is no gain or loss in attending this concert. It is still desirable and holds value to us. There is no drive time to evaluate, which means there is no loss in studying or sleep. A good time will still be had, and grades/scholarships will not be affected. This means that while we are giving up the opportunity to see a band, which is valued $75 more, that money is not a high enough value to risk everything else. In the end, it is best to see the “Good Times Band” and hope that the next time “Hot Stuff” comes to town there is no exam the next