Introduction
When a person decides to wait in a queue, they consciously sacrifice other potential engagements they could be participating in. This decision’s opportunity cost (OC) encapsulates this sacrifice (Walsh, 2013). Notably, the myriad possibilities make a comprehensive evaluation of this cost a herculean task. However, by focusing on the most beneficial alternative one relinquishes, we can calculate the OC of standing in line in monetary terms.
Analysis
Value of Forgone Alternatives
Let us consider an individual earning an average hourly wage in New York or Kings County, as used in Walsh’s article “The opportunity cost of buying iPhones and cronuts,” of $40.16. If they decide to stand in line for two hours, the direct monetary loss attributed to their time would be approximately $80.32.
However, the calculation of OC must go beyond this straightforward economic valuation. For instance, salaried individuals may not necessarily incur a direct loss of income when standing in line during non-working hours (Walsh, 2013). It is inappropriate to ascribe a direct monetary value to the leisure time of such individuals, making the calculation of OC more complex.
Value of Gained Product
This OC must then be contrasted with the worth of the item or benefit received by standing in the line. Walsh (2013) presents an interesting analysis of an individual queuing to buy an iPhone, where the value gained is the phone itself. Meanwhile, Planet Money’s podcast demonstrates the irrational decisions people can make when driven by the allure of a free product (Planet-Money, 2012). It showcases how the perceived value can sometimes override the actual cost.
Conclusion
Therefore, the monetary OC of standing in line is calculated by weighing the value of the foregone alternatives against the value of the product or experience gained. In most instances, this resolution is determined by individual perceptions and circumstances, making the OC highly subjective and variable (Walsh, 2013; Planet Money, 2012). Thus, the challenge lies in accurately determining the most profitable foregone alternative and the value of the gained product or experience.
References
Planet-Money. (2012). Episode 386: The cost of free doughnuts. NPR. Web.
Walsh, B. (2013). The opportunity cost of buying iPhones and cronuts. Reuters. Web.