When you compare this to other decisions you have to make, this one appears to be the simplest. An opportunity cost is a mathematical concept that describes the difference between the money you could have earned if you had not decided to spend it.
It’s easy to see the opportunity cost in our example. If we had bought all the time-loops with the money we earned, we would have saved the exact same amount of money. But, since we decided to use our time-loops to explore the island and have fun, we lost money.
This concept is also relevant in terms of our example. It may be true that if we had spent all the money we earned, we would have saved the exact same amount of money. But, since we spent it anyway, we are losing money.
In the example below, if your friend and you have an opportunity cost, there’s a good chance that you will waste it. But, if you use your opportunity cost to do something useful, you will save money.
In the example below, if your friend spends half of his time on your behalf, he will save half of the money you spend him. But, if he spends all his time on your account, you will spend all of the money he has.
When we think about opportunity costs, we think in terms of money spent. We look at it as money that could have been spent on something else. But, the actual concept of opportunity cost is a little more complicated. It’s the difference between the expected value of using something and the amount of money you would have spent. For example, the expected value of a lunch break is the amount of money we could have spent on something else that would have made our lives more enjoyable.
Opportunity cost is simply a way of saying that money you’ve spent on something is worth less because it’s less likely that you could have used it on something else. When you look at the value of a lunch break, you really only care about what it is that you’re spending it on. So, if you have $25 of opportunity costs, you can calculate how much you’re actually spending on lunch.
Opportunity cost is not really a problem unless you use it like an excuse to not do something you could have done anyway. In the case of lunch breaks, if you don’t use them to avoid something you should, then you are using them as an excuse to do something that you probably should have done anyway.
Opportunity costs are a problem unless they are actually used as an excuse not to do something you could have done anyway. This is because if you do something and it costs you an opportunity cost, you must then decide what to do with that opportunity cost.