Economics principle questions
想問有關2條principle的分別, 雖然lecturer解過, 睇過書但都未好清晰
1. people face trade-offs
2.the cost of something is what you give up to get it
lecturer話第2條中的opportunity cost係計highest option forgone
但好似呢條example咁, 佢話學生上課的opportunity cost 包括不同的fees同埋若果將上課時間用來打工可得的wages, 咁既話咪有超過一樣?唔再係highest one?? 咁同trade-offs有何分別?
- 1 decade agoFavorite Answer
Obviously you are a little confused about the notion of cost.
q1 is not important. It only tells you a general situation. Whenever we make a decision we need to let go something because resources are scarce.
q2 is the definition of cost which is also not too important. It means what you have to forgo in order to obtain something else.
Now we have come to the 'meat' Oh yes, Opportunity cost is the concept you cannot afford to be confused because this is the only cost that you need to think about when making a decision.
Opportunity is the 'next best' option. Which is to say it is only second to the one that you choose to have. It is something 'GOOD' not something 'BAD'. eg. money, leisure time...
I guess you have misunderstood your lectuer. He was right. What he was referring is the summation of all the fees that you paid plus the best value that you need to forgo.
If you are a super star, you probably could earn $10,000 per hour. If you choose to stay in the class and if the class last for 3 hours then your opportunity cost will be tuition for 3 hours plus $30,000.
In the mean time, if you happen to be a lawyer. Assuming you can earn $ 20000 for 3 hours as a lawyer, then the income that you may earn as a lawyer is not an opportunity cost because it is not the second best option. i.e. $30000+tuition > $20000+tuition.
So why is going to school's value higher than $3,0000+tuition? Because you treasure the opportunity to learn and you probably have a lot of money. As such, staying in the class to work for a degree may worth much more than $30000+tuition.
Tuition is 'part' of the opportunity cost because education is not a free good. However, it alone is not the opportunity cost. Say for example. If you are a Mega star, and you probably is super rich. But you only have an elementary school diploma. Then spending 3 hours in the class may worth $1 million dollars to you. In the mean time, since you are super rich, and you are super buzy. Then the opportunity to rest for 3 hours may worth half a million to you. In this situation, your opportunity cost will be (rest at home) worths half a million plus the tuition cost. And earning another $30000 means nothing to you. And it won't be an opportunity cost to this decision.
Is that clear?
Samuel KhouSource(s): I use to teach at Utah State University (HK Branch)