What Are You Giving Up? Understanding Opportunity Cost in Daily Life

By Neeti Daryapurkar

We can’t have everything we want in life. Sometimes we have to choose between two things with a thought of what we missed out on. That's an opportunity cost in action. It’s a simple yet powerful concept in economics that we deal with almost every day, even if we don’t realize it.  Opportunity cost is the value of the next best alternative you give up when you make a decision. In other words, it's what you sacrifice when you choose one option over another. It's not just in the form of money but it can also be resources , energy and even happiness.

As mentioned before , we make decisions every second in a day. For example, consider an employee choosing between work and leisure and he decides to watch a series on a Sunday rather than completing an important project assigned to him. He thus loses his chance of earning a performance bonus or getting recognized by his manager, which could have boosted his career growth. This is an opportunity cost situation. 

For a student, studies and friends are both important. If a student chooses to study for an exam instead of going out with friends. He or she would miss their chance to spend quality time with their friends.

In conclusion,  the opportunity cost isn’t always obvious, but it’s always there. That's why understanding this concept will help you make better choices and to avoid making impulsive decisions.