Opportunity Costs

Blog #5. Title of blog: "Opportunity Costs". In your own words, explain what economists mean when they talk about "Opportunity Costs". What are opportunity costs? Give some examples. And give some examples from your own life. How do, or how will, opportunity costs affect you.Use these links for help. #1. - #2.

Opportunity cost is when one gives up the next best choice when one has to make a decision about what to do. Some example of opportunity cost would be a person who sells stock for $10,000 denies himself or herself the opportunity to sell the stock for a higher price in the future, inheriting an opportunity cost equal to future price minus sale price. Another example would be "If a city decides to build a hospital on vacant land it owns, the opportunity cost is the value of the benefits forgone of the next best thing that might have been done with the land and construction funds instead. In building the hospital, the city has forgone the opportunity to build a sports center on that land, or a parking lot, or the ability to sell the land to reduce the city's debt, since those uses tend to be mutually exclusive. Also included in the opportunity cost would be what investments or purchases the private sector would have voluntarily made if it had not been taxed to build the hospital. The total opportunity costs of such an action can never be known with certainty, and are sometimes called "hidden costs" or "hidden losses" as what has been prevented from being produced cannot be seen or known. Even the possibility of inaction is a lost opportunity". Opportunity cost will definitely affect me, i can spend my money and go eat out with my friends instead of doing this i could be home making up all my work and cleaning my room.