Do economists think strawberry smoothies are a good idea? A lot depends on the kiwi flavor instead – plus a range of other options. This raises the question of opportunity cost.
What is the definition of opportunity cost in everyday life?
Andrea Caceres-Santamaria, the senior economic education specialist at the St. Louis Fed, explains “opportunity cost” in a recent Page One Economics article: Money and Missed Opportunities. let us now mention some examples of opportunity costs.
What are examples of opportunity costs?
Examples of opportunity costs, Life doesn’t allow us to have everything we want. This is where scarcity enters the picture. Despite our limitless wants, goods, services, time, money, and opportunities are limited.
In other words, it is this concept that influences choices – and, consequently, costs and trade-offs, says Caceres-Santamaria.
For example, she decides to purchase a smoothie for $7 at the mall. The author notes that many people would view the choice as a single one based on whether you want the drink or not.
As a result, she suggests putting on “a unique set of economist glasses” to see the decision differently, asking:
- What is the value of this to me?
- What am I willing to sacrifice to have it?
- Can I gain this in the future if I lose it now?