[ad_1]
Everything has a cost. The choices we make daily have a cost. No, it is not always financial; but still a cost.
In economics, the cost of these choices is called opportunity costs.
Opportunity cost is one of the terms you learn early in the introduction to economics courses. It is defined as “whatever must be given up to obtain some item.”
In relation to business and the economy, it ultimately refers to the decisions made by economic entities (households, firms, governments, etc.) to weigh the cost, not just immediate cost but future cost, of making decisions. Consideration is given to whether an action will save now and lead to losses in the future, or if an action will cost more now but lead to a better future.
Two examples often used to portray this concept to students are:
- the choice of going to university or not going to university
- the choice of spending time studying over other activities
As the examples show, the concept of opportunity cost does not only apply to business and the economy. It carries over to any area of life and can help you weigh choices towards achieving your goals.
To achieve a goal or desire, our daily activities must align with that goal.
We have to give up the things that do not move us forward (one activity that moves you toward your goal may very much differ from what moves your friend or colleague towards their goal.)
An example?
Think about two individuals. Both have blogs and both want to grow their businesses. Let’s call them Jai and Kai.
Jai is a photographer and wants to provide stock photos. Kai is a writer and wants to start freelancing. Both have to create content for their websites. But the emphasis each places on photography and writing should be totally different.
Both these skills, photography and editing photos as well as writing, are valuable to learn. However, the way they prioritize their time will determine how quickly they progress towards their individual goals.
All two of them can work on developing both skills. But if Kai is spending too much time taking and editing photos than writing, she progresses slower to her goal. Kai wants to be a writer and should make decisions likewise (maybe she needs to hire Jai for all her photography needs).
This is a very simplistic example, I know, but it gets the picture across. The choices you make lead to the outcome you achieve.
Sticking to a choice when things seem to be moving too slowly can be hard. But that’s the thing about opportunity costs, you’ve got to think about what it will take (time, money, energy) and what the result will be (the reward/end goal).
When you make a decision to pursue a goal, there has to be a willingness to put in the work and wait it out. The results won’t always be automatic and if you go around shifting from decision to decision because it is taking too long then you could miss out.
There is a reason people say I’m going to give myself a year or two years to do something. It is a continuous investment that leads to results. When you make a decision with confidence and stick with that decision, it shows that you are willing to go through the ups and downs of that decision.
It’s the opportunity cost. It is making the choice today knowing that it may not pay off immediately but will have extreme benefits in a year, maybe two years or even five years.
What choices are you going to make today for your future?
[ad_2]
Source link
