Is it possible for a person to incur an opportunity cost without spending any money? Explain.
Because the concept of an "opportunity cost" extends beyond economics, it is possible to suggest such "costs" that do not involve money. Opportunity costs represent, to put it in psychological or literary terms, a road not taken. When it is time to make important decisions, it is often wise to write down the pros and cons of each available option. This exercise can, and often does, involve business decisions, but it also involves the everyday decisions that constitute life as an adult. How one decides to invest financial resources, such as in a long-term savings plan versus using available resources to purchase an item the value of which one hopes will increase exponentially, is a common dilemma. The opportunity cost in such a scenario would be the financial gains sacrificed by the latter option in deference to the greater level of financial security one might enjoy from adopting the more conventional option, in effect, low-yield savings. Choosing an expensive vacation over a home-improvement project can represent an opportunity cost, as money spent on having fun at the beach is coming at the expense of making needed repairs to one's home--repairs that might increase the value of the home.
The above clearly represent scenarios involving money. "Opportunity costs," however, can conceptually be applied to non-monetary decisions. Time spent with one's family, for instance, can represent an opportunity cost. There is a very real non-monetary value that can be placed on the time one devotes to one's family.
Emotions play a role in many decisions, and these decisions do not necessarily involve financial considerations. Choosing to be seen associating with the cooler students in school may come at the expense of more meaningful relationships with students who lack the image of the others but who have more to offer intellectually or emotionally. Life is all about trade-offs, and there are costs associated with almost all such decisions.
Opportunity cost is what is given up when a scarce resource is used in a certain way. It is possible for a person to incur an opportunity cost without spending money. While money is a scarce resource, there are other scarce resources that don’t involve money.
For example, time is a scarce resource. When a person has a limited amount of time and needs to do many things, a person will incur an opportunity cost when he or she chooses to use time in a given away. Let’s say a person has one free hour in a given evening. The person has a homework assignment that will take an hour to complete. This person also has an opportunity to visit a sick relative in a nursing home. This visit will last an hour. If the person decides to visit the sick relative, the opportunity cost will be not being able to do the homework assignment.
It is possible to incur an opportunity cost in situations unrelated to spending money.