You can spend spring break either at home working for $80 per day for five days or go to Florida for the week. If you stay home, your expenses will total about $100. If you go to Florida, the airfare, hotel, food, and miscellaneous expenses will total about $700. What’s your opportunity cost of going to Florida?
Opportunity cost comes about because of various choices that people have to make due to limited resources (Tucker, 2007). The choices in the question are staying at home or going to Florida. Staying at home will make one to earn (80 * 5 days) 400$. Going to Florida means that one will have to pay various expenses that include food, hotel and airfare. As a result, one will pay 700$. In the second option, more money is spent while at the first opportunity cost the person gains money in the five days he or she works. My opportunity cost because of going to Florida will be foregoing the earnings of $400. Calculating the opportunity cost by dividing the first value by the second value.
Opportunity cost = 400 / 700 = 4 / 7
Therefore, for every seven dollars spent I would have gained four dollars if I had stayed at home and worked. The value of going to Florida may include experience, which may be added opportunity cost. As such opportunity costs involves the choice of various options with the stalemate being that one cannot choose both options since the resources especially the money and time to do them are limited in supply. One is therefore forced to choose one option and leave the other. As such going to Florida makes staying at home and working become the opportunity cost. The opportunity cost of staying at home and working becomes going to Florida. The scarcity of economic resources thus creates choice, which creates opportunity cost. From the above question, we get to see that an opportunity cost can be of benefit or cost to a person.