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Opportunity Costs (OP) Essay

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Updated: Jan 15th, 2022

According to Mankiw assertions, opportunity cost (OP) is the value of any prospect that is not considered when two mutually existing choices are present (p. 55). This implies that it is like a sacrifice associated with the second alternative available at individuals’ disposal when there are multiples options to choose from. Simply put, OP asks the question appertaining to what one would have done if the other choice had not been made. This cost comes into action in any decision that involves choosing between two or more options. As often applicable in economics, it is a crucial concept that is used in a wide range of business decision making.

McEachern further claims that OP can be calculated on almost every action we do in life (p. 28). However, they are habitually ignored in decision making. For example, a student joining college would only consider such costs as tuition, books and housing which are deemed monetary costs in college. For this decision, scores of opportunity costs have been ignored. In fact, activities missed when in school, wages resulting from employment, experience that would have been gained for those working years and loss of revenue which would have been gained in investing the tuition fees serve as better examples. OP foregone may have significant value though not monetary value. For every action we choose to do we are foregoing another action that we could have done.

In real life situations people are often inclined to forego some choices after considering the best alternatives that materialize to be beneficial. Thus, incurring opportunity cost. When one decides to watch a television, he dedicates his time that would have been used on various other activities (McEachern, p. 28).

Mankiw claim that to protect the environment opportunity cost must be applied (p. 55). An example has been the legislation that required reformates carcinogenic aromatics to be eliminated from gasoline. Refineries are made to install equipment to the tune of millions of dollars and consequently pass the cost to the consumer. After its elimination, cancer cases dropped significantly. The decision was nevertheless highly criticized given that the money spent on installation of equipment could have been appropriately used in cancer treatment or in other ways. The decision made served as the OP of eliminating carcinogenic aromatics in gasoline.

OP can also be applied by an individual in daily life situation to enrich the niche understanding. In essence, environment dictates the lives of individuals. Too much exploitation or misuse of natural resources can trigger disasters such as global warming. Individuals must forego some luxurious activities that might impact negatively on their surroundings (Mankiw, p. 55).

Setback emerging due to lack of space where houses could be erected has proved to be a major global problem. Although countries have massive tracts of lands under forests individuals are forced to forego the choice of building on these lands to conserve the available forests. Notable people have risked their lives to protect natural forests that are essential to the environment. Where people can afford to buy high fuel consuming vehicles, one may opt for low fuel consumers. Such intents might reduce the rate of carbon emissions that affect the ozone layer. Mankiw maintains that in a such a situation an individual foregoes the comfort of an expensive car to preserve the environment (p. 55).

In conclusion, plastic paper bags are a nuisance to the environment since they offer a greater disposal challenge. Given that they are non-biodegradable proper disposal via incineration is considered a priority. When recklessly disposed they scatter everywhere and may sometimes choke. Incineration however produces carbon emissions that pollute the environment. With individual efforts plastic paper bags will not be an environmental nuisance. For example, the correct usage of the available dust bins in various sections can curb littering of the environment. Individuals should refrain from free-rider mentality. These cases showcase how individual decision making by foregoing one decision helps him to understand his surrounding and conserve the environment.

Works Cited

  1. Mankiw, Gregory. Principles of Economics. Independence, KY: Cengage Learning, 2011.
  2. McEachern, William. Macroeconomics. Independence, KY: Cengage Learning, 2011.
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