Opportunity Costs

When economists talk about opportunity costs they are looking at two situations and their trying to decide which one to choose and if they pick one what will be the result of not picking the other one. Would they lose money because they didn't pick the other one or would they gain money with the option they picked? They are talking about the "what ifs"! What if ..... this happened?

Opportunity cost is the cost we pay when we give up something to get something else! Choosing one over something else.

Some examples of opportunity cost will be if a major company is deciding to pick to have paper towels in their bathrooms or blow dryers. If they pick the paper towels they have to pay to have the towel dispenser put in, and pay to add on two more janitors to make sure the bathrooms stay clean, and giving the janitors benefits the total cost of this installment is $150,000. But if they install the hand dryers they don't have to higher more janitors and just have the regular janitors install the hand dryers and the total cost of this is $100,000 . You save $50,000 and the blow dryers save you money each year and you can use it for something else.

Some modern day examples that we could relate to is your sister asked you to babysit your two nephews and she'll pay you $20 an hour and she'll be gone for 4 hours. On the other hand your boyfriend want to take you out on a date to see the latest movie and you really want to go and you guys decide that he'll get the tickets and snacks if you pay for the dinner, and the food came out to be came out to be $45. Now you can go with him and spend $45 or babysit and earn $80. You can reschedule but he'll be upset. Which one would you pick?

Or even a company wants to advertise they could sign up for myspace and advertise threw there or pay to make a commerical on NBC. Which one would you pick?