Opportunity Cost as the Basis of Decision Making
Some economic principles (in fact, most of them) are not limited by the sphere of economics and have great influence over the other lines of human activity. The idea of opportunity cost is one of them. It means that the value of any action should be judged according to how profitable would it be to do something else? The opportunity cost of doing any action is all the other actions that could have been done instead of it but weren’t. If the action brings more profit than any of its alternative, then the decision is economically correct. If some of the alternatives can bring better results, then the decision is economically wrong.
The matter is, in the same way, applying to producing or selling one commodity instead of all the other possibilities, it can be applied to any decision human being takes in the course of his or her life. The value of action may be not judged according to its economical profitability, but it doesn’t change much – a person always judges what is more important or valuable for him or her. The economical way of thinking presupposes that any important decision should be judged from the point of view of opportunity cost and then the most promising alternative should be selected.
I don’t really mean in what units you measure this value. The important thing here is the…