One Seized is One Lost, This is Opportunity Cost
December 21st, 2008. Published under UrbanSpeaker. No Comments.
I have been around the mall more often then usual with it being Christmas and all, and have been berated with loud signs proclaiming “50% of everything in store!”. Many of these deals have been catching my eye with the promise of more for less. However, often when people see a good deal they only are looking at the discount they are getting. But, this is not the cost they should be looking at.
“But what should we look at Mr. Speaker?”
“Why that’s simple! Opportunity cost!”
Opportunity cost, as I have been learning more recently, is the evaluation of the second best alternative lost by choosing the one you did. More simply, if you buy a coffee for $2 you miss out on buying an iTunes song for $1.
Opportunity cost is also lost pleasure, called utility, that you could have had if you chose the alternative. The coffee gives you a great taste, but is gone. The song you can listen to for a long time, and gives enjoyment on a more long term basis.
So what you should think is, what choice has the lowest opportunity cost. More simply, what purchase makes you give up the least in terms of viable alternatives.
So when you are out and about, and you see something you really want, consider what you won’t be able to get if you indulge yourself.
Photo by: Tim Parkinson
