In our lives, choices constantly confront us. Whether it’s deciding what college degree you should pursue, how to spend your leisure time, or even what to have for lunch, every decision we make involves an inherent trade-off. This trade-off is known as the concept of opportunity cost. Let’s discuss the significance of opportunity cost, its influence on decision-making, and its impact on our lives.
What Is Opportunity Cost?
Have you ever experienced accepting a scholarship grant from a university in your hometown and ended up knowing that you got the scholarship you applied for abroad? This is one example of opportunity cost, which refers to the value of the next best alternative foregone when making a decision. It encloses the potential benefits we sacrifice by choosing one option over others. But we must be mindful of every choice we make because every judgment comes at a cost.
To better understand how opportunity costs work, we will look at stories that require decision-making and analyze how we can resolve them effectively.
Career Building: Choose Wisely
Toma and Kahane are both graduates of Ateneo De Manila University. They both applied for a marketing position abroad in a multinational brand and fortunately, they got accepted as a marketing associate. However, they approach their career-building differently.
Toma’s goal is to find a job quickly to buy a house and a car. Thus, he accepted the offer. Kahane, on the other hand, declined the offer. Because he knew that some other companies he applied to are willing to pay a higher salary than he deserved considering his skills.
Opportunity cost significantly impacts our professional lives. Choosing one career path often means forgoing potential opportunities in other fields. Assessing the long-term consequences and potential benefits of each choice is crucial. Recognizing opportunity cost allows us to make career decisions that align with our passions and aspirations.
Financial Investments: The Trade-Offs
When the pandemic struck the Philippines, the market was in turmoil as everyone withdrew their assets from their stock trading. Joanne is one of the stockholders who withdrew their shares from a specific company. She took her assets to have financial security amidst a crisis.
One year after the lockdown, pharmaceutical companies are developing a vaccine against COVID-19. Aggressive investors saw it as an opportunity to invest and support the company’s research. However, Joanne is still skeptical and decides to buy an aircon since she is working from home.
After a year, the stock prices went up after the vaccines were proven effective and distributed worldwide. This led to Joanne realizing that financial decisions are rife with opportunity costs. When we decide to hold our money, purchase goods, or make any financial commitment, we must consider the trade-offs involved. Understanding opportunity cost in financial decision-making helps us make wise choices and achieve our financial goals.
The Final Word
Opportunity cost is ubiquitous in our daily lives, as choices constantly confront us. For instance, choosing to eat at an expensive restaurant alone vs. going to a cheaper place to eat but with friends or family.
Opportunity cost is an essential concept that permeates every aspect of our lives. By recognizing the inherent trade-offs and evaluating alternatives, we can make informed decisions that align with our goals and aspirations. Whether pursuing a career or making financial choices, opportunity cost guides us toward a path of conscious decision-making. Embracing the hidden trade-offs inherent in every choice empowers us to shape our lives in ways that optimize our well-being and fulfillment.
Start your crypto trading journey through Coins.ph!
Enjoy a 20% rebate on your trades when you sign up with this link: https://invs.st/CoinsphCryptoJourney
