Business / Individual faces decisions. As everyone must have to experience critical decisions in life. Some of the decision must be having multiple choices where an individual thinks of the most benefits and the flexibility and then takes one right decision. The cost of choosing the next best alternative is considered the opportunity cost.
This idea is not limited to this aspect as we can apply the opportunity cost to the multiple parts of the decisions. Understanding more transparent with the help of microeconomics example:
Late Hours Workings/ Family time
This example is based on the daily working routine of life. Let’s suppose a girl, Sara, and she spent the late hours in her office for an important project that will lead her towards future benefit; let’s look at the opportunity cost here.
It is as simple as that here; the opportunity cost would be the advantages that would be driven from the spending quality of time with Sara’s family and the time she spent with her kids.
Buying Equipment / Money
Another explains concerning the topic of opportunity cost concerning individual decision making. The example is of the business owner. Let’s suppose we have the CEO of the XYZ multinational company. For guess, he has decided on purchasing the new equipment for the office. Here, in this case, what would be the opportunity cost? The opportunity cost would be the money that is being spent on the equipment.
Business Software / Establishment of the software
Let’s discuss one more explain something different from the business. For suppose the successful entrepreneur is studying at the XYZ college. At college, he reaches the level of decision to leave with higher education and continue doing his business. The opportunity cost is the college he went to for becoming a Successful Entrepreneur.
Business / Individual Decision Making
There is only two major where the decision making is depending upon:
- Opportunity Cost
- Perfect Satisfaction with choosing the right benefit.
Benefits of Opportunity Cost Concerning Individual Decision Making
Let’s have a recap on the opportunity cost. Opportunity cost is the benefit of financial or non-financial advantage that allows you to select one option. Following are some of the edges on the individual basis for making the right decision making:
In-depth Analysis of the Opportunities
The primary benefit of the opportunity cost is you get to know the quality and the price of each decision. You get to see the value of what you have selected and what has been given off.
Let understand this with the help of an example if you go to the grocery store and look for the XYZ product as the cheese for making food. At the same time, you wanted to buy milk and all of a sudden, you check your wallet and get to know you can only afford one of the items. Here in this, you will consider what more is essential for you and what is not. This is the reason. You get hand-on knowledge on decision making with the motive of maximizing the resources.
Another advantage, the opportunity cost aids you is that it helps you compare the prices and the services for the right point of decision. Let’s under moreover with the help of the example. The businessman has a budget of 200,000, and he has to buy ten pieces of equipment x at 20,000 or 20 Equipment piece of y at 10,000. Here, in this case, you decide to buy 20 parts, and you find that 20 part with low price is more worth than the ten samples.
Personal Point Of view Opportunity Cost / Economist Fallacy
I believe that every theory or aspect has the support and researchers standing against the studies regarding the personal perspective. After studying further research from the article of JMDE, I think with the help of the idea, and I’m afraid I have to disagree with the point that opportunity cost is the economist fallacy.
To support my point of view, I would be giving the researcher Michael Scriven’s theory support.
If I’m spending my time messaging you, I am losing time to message someone else that is an opportunity cost! Yes, indeed, it’s like a trade-off sees there always be consequences of not choosing an option, but we have to look for the values we can bear.
In conclusion, the decision process for the business has multiple set of observations that aids with the positive aspect of the result. Firstly there are Business Applications that help with making the plans of decisions before it moves with the process of implementation. Secondly, there are various sets of opportunity that arises in the view of taking the set of decisions. Here the persons choose the set of opportunity which is leading a high level of benefit for a person.
This blog aids in the fact that the business world thrives upon many factors for building a name in the market and garnering a significant market share. Every organization is working to ensure that they increase their overall sales and their share of the market. The sales and success require the company to create relationships with new customers and retain their existing customers. As the brand Loyalty is always recognized and treated as one of the most integral parts of the business world. In fact, when considering brand equity, brand loyalty forms one of the key constructs in understanding most concepts related to brand equity.