MoKelly
Super Member
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- Oct 30, 2009
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Let me try this one more time. Opportunity costs can be measured in monetary terms but are more general -- they are the benefits you forgo by choosing an alternative over the next-best mutually-exclusive alternative. As other posters have mentioned, there is more to life than money.
Back to the OP, if the poster can earn $90/hour and he considers that to be his next-best alternative to working on his aerator, his opportunity costs are $90/hour if he chooses to work on the aerator.
Now suppose that the poster considers boating to be his next-best alternative to working on the aerator. His opportunity cost of working on the aerator is the benefit (enjoyment) he forgoes by not boating.
Opportunity costs are unique to each individual. But regardless of that fact, your time is not free. If you have mutually-exclusive beneficial alternative uses for your time, choosing one alternative over the next-best alternative has a cost, the benefits (monetary or otherwise) you miss by not undertaking the next-best alternative.
Steve
The above makes sense to me.
However, don't you believe people instictively make this choice everyday? The guy who chooses to build his own tool vs. going boating already made that choice. He knew he could go boating or make the tool. He chose what he wanted to do.
Doesn't seem lik ethere is anything more to analyze.
MoKelly