Opportunity Cost

Ok so yesterday i end up sleeping at 6am. Although i was in bed around 4.30am. I think im suffering from insomnia.

So anyway, imma talk about opportunity cost today. For newbies (im a newbie too but maybe a lil advance hehe) or non economic students, you might say "wth is this opportunity cost? Sounds boring and uninteresting" Little that you know, opportunity cost occur in your everyday life.

Ok imagine this, its after the festive season and you've gained a few kilos so you decided to go on a diet. But you then have this craving for chocolate cake. So you go to the bakery, and there's 2 types of chocolate cakes on offer. One is the rich, moist, exquisite and 100% fattening chocolate fudge cake. The other is a chocolate cake as well, but this is low in fat, with oats in it (yuck?).

So you weigh the options, if you get the first chocolate cake, you will fulfill your cravings for chocolate cake and with every bite, you will feel the orgasmic explosion at the expense of gaining another 100 kilos (exageration intended :p). If you get the second chocolate cake, you will likely keep ur weight under control at the expense of eating a less than delicious cake and not fulfilling your cravings. Decisions decisions...

After a loooooong deliberation, you think "owh screw the diet, im getting my self the all fat chocolate fudge cake" Here, you are applying opportunity cost. The opportunity cost of buying the fat cake is being able to keep your weight under control. So by buying the fat cake, you are foregoing your diet.

So THAT my friends, is opportunity cost. Basically it relates to decision. If you decide on A, then the opportunity cost is the benefit that you will get from B. Pretty simple huh?

Hope this helps, until we meet again..toodles~ :)