To provide an example, let's say Jim is a full-time student at the University of Minnesota and has received a school loan refund in the amount of $1,500. Jim would currently like to purchase new tires for his car in order to prepare for the upcoming winter season, as well as a new snowplow for his driveway and sidewalk. Jim also happens to owe his parents $1,500 for rent assistance during these last few months. Aside from attending school, Jim also interns at a local radio station during the week and delivers pizzas on the weekends.
If Jim decides to purchase new tires for his car, then the opportunity cost of this purchase would be the snowplow and the repayment of this loan from his parents.
If Jim decides to purchase the snowplow, the opportunity cost would be the new car tires and the loan from his parents.
If Jim decides to repay his parents, the opportunity cost would be the car tires and the snowplow.
Jim did what he felt was best and repaid his parents. After all, if one loan was handled successfully, then maybe Jim could ask his parents for a loan for car tires or a snowplow in the near future.
An opportunity cost isn't always a physical item. Let's say Jim decides to attend a college football game with friends instead of staying home to complete and submit his homework on time.
The opportunity cost of attending the football game is the completion and submission of his homework in a timely manner.
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To my subscribers,
I realize that this post may not fit the bill of what my blog is necessarily about. This is however, a graded assignment so please have patience until I'm able to upload my next interview.
Thank you for your time and patience,
QW
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