Opportunity cost
Date created: 2022-04-26
What alternatives are there, and what is the value of each of them? If I have a high-wage job, I could pay someone to do a service for me rather than doing it myself, and instead work one additional hour at my job.
The value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives. Assuming the best choice is made, it is the ‘cost’ incurred by not enjoying the benefit that would have been had by taking the second best available choice.
Opportunity cost and other decision-making tools become relevant when faced with a scarce resources, and in personal productivity that resource is often time. Given that my time is limited, what is the best way to spend it?
A recent personal example was when I moved apartments. I spent the entire day cleaning the apartment when I could have just hired someone to do it and spend my time on my actual job!