What is your opportunity cost of going to Florida in the following scenario? (Opportunity Cost) You can either spend Spring Break working at home for $80 per day for five days or go to Florida for...
What is your opportunity cost of going to Florida in the following scenario?
(Opportunity Cost) You can either spend Spring Break working at home for $80 per day for five days or go to Florida for the week. If you stay home, your expenses will total about $100. If you go to Florida, the airfare, hotel, food and miscellaneous expenses will total about $700.
Opportunity cost is what is given up when a decision is made to use a resource in a certain way. In the example you have given, the person could work for five days and make a total of $400.00. Since there would be about $100.00 in expenses, we must subtract that from the amount earned. Thus, if this person stayed home, this person would have made $300.00.
By taking this trip to Florida, the person would incur about $700.00 in expenses. Since the person would be spending $700.00 for the trip and would be giving up $300.00 in income that would have been received by working, the opportunity cost of taking this trip to Florida would be $1000.00. When a person makes an economic decision, it is very important to weigh the opportunity cost of the various options available. This will help the person make a wise economic decision.
If you stayed home from Spring Break, you would have gotten $400 from working. However, you would have incurred expenses of $100 so your net income would have been $300. If you go to Florida, all of your costs add up to $700. This means that there is a $1000 difference to your finances between going to Florida and staying.
Your opportunity cost for going to Florida, then, is $1000. You can also say that the opportunity cost is whatever you would have done with the $1000 if you had not used it going to Florida.