Opportunity cost analysis requires the comparison of “costs” between alternative choices when you must choose one of the alternatives. Often the choices involve the use of your time (you cannot be in two places at one time), but they can also be choices of the use of limited resources, like money.
In calculating the “cost” of an alternative, you need to recognize that the cost may be positive or negative. For example, going to a movie will involve the cost of the ticket – a positive cost. Working for an hour at your job will result in earning money – a negative “cost.” When you compute opportunity costs, make sure you use the correct sign when computing the cost. The opportunity cost of an alternative is the difference between the cost of that alternative and the choice foregone when choosing that alternative.
Using the example I just gave, assume you earn $15 an hour at work and a ticket to a 2-hour movie is $10. If you take 2 hours off work to go to the movie, your opportunity cost of going to the movie is $10 (ticket cost) – (-$30) (lost wages) = $40. In this case, subtracting the negative cost of the foregone choice resulted in an additional positive cost.
Question:
Discuss the opportunity costs of your visiting the doctor’s office. Calculate (in $$$) youropportunity costs of health care.
