Economics Opportunity Cost

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Economics: Opportunity Cost

Opportunity cost is the cost or value of the next best alternative of a choice in decision making. In every circumstance, individuals are surrounded by situations that require decision making. This present a field of choices and all has consequences. Through the analysis of every choice an individual must be prepared to suffer the cost of forgoing an alternative best choice for the same situation. This paper assesses some of the opportunity costs that can be suffered in the process of seeing Good Times in concert.

Every value is associated with some cost and in this case, the value (utility) which determines the level of satisfaction of want is attained through attending a concert. It is also true that resources are limited in supply, and the resource in this case is the available finance to attend a concert, which is $150. This case also presents choices, that including seeing concert in ‘‘Hot Stuff’’ and the other choice is seeing the concert in the ‘‘Good Times Band’’. The criticality of the matter is that all cases will help in deriving the same level of satisfaction, i.e. seeing the concert. However, the analysis of each alternative provides a slight contrast of consequences considering that there is a morning exams.

The cost of value that can be attained at ‘‘Hot Stuff’’ is $225. Considering that the amount available is $150, other options like borrowing may come into focus, but there is another alternative at the ‘‘Good Times Band’’. In ‘‘Good Times Band’’, the cost of seeing the concert is valued at $150. The perfect match of all the alternatives is that both ‘‘Good Times Band’’ and the ‘‘Hot Stuff’’ price the ticket per head at $150. Therefore, considering the amount available, there is a perfect possibility of attending either of the concerts. However, although seeing the concert at ‘‘Hot Stuff’’ may have other additional advantages and entertainments, there is a constraint of the money. Therefore, it is economically wise to attend the concert at the ‘‘Good Times Band’’.

Being a student with exams in the following morning, the distance between school and either of ‘‘Hot Stuff’’ and “Good Times Band” is very important. Therefore, considering that attending the concert at ‘‘Hot Stuff’’ would take hours to drive to the place, it would actually become very difficult to make it to the morning exams at school. Therefore, the option of attending the concert at ‘‘Hot Stuff’’ must be forgone. The cost of $75, i.e. $225-150 difference means that it would have derived unimaginable level of satisfaction. However, that level of satisfaction, valued at $75 becomes the opportunity cost that must forgone by attending the concert at “Good Times Band” in order to catch the morning exams at school.

The understanding of opportunity cost makes an individual to argue both economically and logically by making an alternative choice that best satisfy his or her wants, while at the same time considering all the surrounding costs and consequences. In this case, choosing to attend the concert at “Good Times Band” is very logical considering that the distance to be travelled is considerate due to school, and catching the morning exams would not be a problem. It is also economical for at student level considering that it costs $75 less than attending the same concert at ‘Hot Stuff’.