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For the life of me I cant grasp opportunity costs when time units are involved. I know its simple and I must be over thinking it. Is there a trick or shortcut to finding out the opportunity costs?
Great question. You’re not the only one who struggles with the concept of opportunity cost. Check out this blog post about economists’ understanding of opportunity costs. When trying to understand opportunity costs related to time, I recommend you think about yourself. Your time is valuable! Think about the last time you watched an hour of TV. What was the next best way you could have spent that hour? Suppose your next best alternative was to read a book. Even though you’re not making money doing this activity, this is still an opportunity cost. By watching TV, you are giving up the enjoyment you would have received from reading a book. Or perhaps you could have made $25 doing some freelancing work instead of watching TV. The opportunity cost is the value of the next best alternative use of your time. It’s very common to overlook the opportunity cost of time in lots of scenarios. Suppose you go to the movies and it costs you $10. The opportunity cost of watching the movie is not simply the cost of the ticket ($10) but also the time you spent watching the movie. So if the next best way of spending that time was playing soccer, then the opportunity cost of the movie was the $10 and the enjoyment or utility you would have received from playing soccer. Hope this helps!