This blog post is a blog post I did in the very beginning of the year on “opportunity costs.”
I believe this is one of my best posts as it demonstrates my ability to not only define economic terms correctly, but to also give real world examples. I also feel as though anybody from a person who doesn’t take economics to an economist can read my blog post and understand every word of it.
1. The effect of oil spill on the supply of fish in the Gulf of Mexico.
2. The effect of an increase in population on the demand of spaghetti.
3. The effect of the price of a song on iTunes dropping on the demand of mp3 players.
4. The impact of a rise in gasoline prices on the demand.
**change in price so no change in supply/demand but just the quantity.
5. The impact of a rise in gasoline prices on suppliers.
**change in price so no change in supply/demand but just the quantity.
6. The government gives a subsidy to manufacturers of vaccinations.
Source: Jon Edmiston
You can’t have it all: sacrifices must be made in the process of making choices. This, in the world of economics is known as opportunity cost. Opportunity cost involves all the choices we make and this term does not only come up in economics class, but our daily lives as well. We always make choices; big and small. For example, on the weekend, I might choose to go to the movies and talk to my friends taking up a whole 5 hours of my Saturday afternoon. The movie will cost be 1,500 yen and I will spend 800 yen on transportation. I might decide to buy a drink and popcorn at the cinema costing me an extra 500 yen. My total expense will end up being 2,800 yen. Instead of going to the movies, I might decide to stay home and finish my homework. Therefore, the value of me finishing my homework is the opportunity cost of going to the movies and hanging out with my friends.
Netherlands has created a new type of concrete that is considered to be “eco-friendly,” as it helps improve the air quality in urban cities. However, this concrete costs 10% more (total cost of fitting included) than regular concrete. Now, cities have the opportunity to change their concrete in order to “clean up [their] urban jungles.” This whole decision making process involves one of the key concepts of economy, opportunity cost. Before making a decision, cities must consider all the different choices out there. Instead of spending money on the new concrete, they could be spending the same amount else where. The other choices are the opportunity costs of purchasing the new cement. (article can be found here)
Opportunity cost can be applied to our daily life as well as the world.
In class today, we performed the “You Can’t Place a Value on Life” activity. We had to choose several patients out of a total of six to save as we, the experts working at the hospital was given a limited number of hours per week, 100 hours, to use the machine. My group decided to save the patients: Peter, Todd, and Tom. We based our decisions on their marital status, age, and whether or not they had other diseases. By doing so, we came up with the following conclusions/reasons:
Peter: (40 hours) He is married and he has four children. He has a big family and he works as a teacher. We assumed that his income supports his family and if we decide to not save him, his family would suffer. He also doesn’t have any other illnesses and he does have insurance.
Todd: (20 hours) Todd is a student as he is only sixteen. He has a slight mental retardation and he does not have any insurance. However, we chose to save him because of his young age. Despite his other illnesses, he does have a great potential to live a great life in the future. Also, the number of hours required for him per week was quite low.
Tom: (40 hours) We decided to save Tom because he was married and he was a father of three children. He has insurance and he does not have any other illnesses.
This activity allowed us to understand “opportunity cost.” Opportunity Cost is the amount that must be lost in order to gain something. Since we only a total of 100 hours, we weren’t able to save all of the patients. After we were done sharing our ideas with the class, we found out that by not saving Mary, the government will have to help support her family.
I am taking Economics this year not only because I have a strong interest in the subject, but because I feel as though the information I will be learning in the next two years will help me understand more about the world we live in today. This class will help me further understand the multiple economic issues people combat and it will hopefully help me make wise decisions in the future regarding money and business.
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Source: United Nations University in New York
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