What are you hungry for? Regardless of your answer, humans are always “hungry” for something whether that is delicious food or achieving our goals. Humans, consumers and producers, are constantly on the hunt for the next best thing in order to maximize their utility. Charles Wheelan makes this idea crystal clear when he says, “Consumers try to make themselves as well off as possible and firms try to maximize profits” . Therefore, the never ending problem with maximizing your utility, as a consumer or producer, is the idea of opportunity cost.
Opportunity cost is the next best alternative choice when an economic decision is made which never fails to leave all humans accountable for their decisions. This loss and gain effect allows humans to withhold the opportunity of choice. If people did not have to make decisions between two things then scarcity would not be an issue, and there would be free goods available on the market.
Consumers and producers do not have the luxury of free goods, so the idea of a nonexistent free good has become common knowledge of every person involved with affecting the economy. When contemplating the idea of college, a student must take into account all of the characteristics he or she wants in a school along with his or her eligibility. Choosing between different colleges can change the entire course of your life which makes the opportunity cost spike. Wheelan emphasizes this idea by stating, “Bear in mind that maximizing utility is no simple proposition. Life is complex and uncertain” . For example, a student is choosing between University of Colorado at Boulder and University of Wisconsin at Madison. This student adores both schools but has to make a tough decision of where to spend his or her next four years. In order to make this rigorous choice, the student must take all aspects of the decision into consideration to help him or her choose the best school fit for them. As a scenario, a student confidently chooses to attend the University of Wisconsin at Madison in order to pursue a major and graduate degree in genetic counseling. The student ends up changing her major and career goals which makes her regret the decision of attending UW because she could have had a better college experience in Colorado. This scenario is a likely opportunity cost of picking colleges because you can never truly know what may lie ahead.
Wheeler accurately uses an example of a person teaching junior high math or marketing Camel cigarettes in order to further explain opportunity cost. Wheeler says, “the latter job would almost certainly pay more while the former job would offer greater “psychic benefits” . At the end of the day, the math teacher would feel better about themselves even if they take home a smaller paycheck.
Opportunity costs are a part of every decision that human beings make on a daily basis, but it is all based on the actions that we choose to take that will make those choices worthwhile. Even though there is no such thing as a free lunch, people should not stop “eating” or making decisions because that is what makes the world go round.
1 Wheelan, Charles. “The Power of Markets.” In Naked Economics: Undressing the Dismal Science, by Burton G. Malkiel, 20. New York, N.Y.: W. W. Norton & Company, 2010.
2 Wheelan, Charles. “The Power of Markets.” In Naked Economics: Undressing the Dismal Science, by Burton G. Malkiel, 9. New York, N.Y.: W. W. Norton & Company, 2010.
3 Wheelan, Charles. “The Power of Markets.” In Naked Economics: Undressing the Dismal Science, by Burton G. Malkiel, 10. New York, N.Y.: W. W. Norton & Company, 2010.