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.
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.
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.