Opportunity Cost

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People must make choices because of scarcity, which is why we have made the concept of opportunity cost. We make different choices everyday based off of what we do, what we buy, and what we do with our time. Opportunity cost is what determines all of these. Every time you make a choice there's a certain value you place on that choice. You might not know it but every choice has a value to you. When you choose one thing over another you're saying to yourself I value that more than the other choice I had. Value has two parts, benefit and cost. To make a good economical decision you want to make a decision that has the greatest benefit and the lowest cost. The economic model I will be using to explain opportunity cost will be John choice to either …show more content…

They do not consider what benefits the phone will actually have to them, other than they will look cool because they have the newest gadget. Most people do not consider the pros and cons of purchasing a new phone. What would the benefits be versus the actual cost? The Wall Street Journal article titled Apple's iPhone 6s vs iPhone 6: The key differences By Wilson Rothman, explains what the difference between the old iPhone 6 and the new iPhone 6s.
In our model John is considering the purchase of the new iPhone 6s. With the new and improved cameras, stronger aluminum alloy body, faster processor, and also available in rose gold (Rothman), this seems like the ideal decision to buy the phone. To do so he would have to trade in his old phone and also have to give up buying tickets for is favorite bands concert, to be able to afford it.
John has two choices to buy the IPhone6s or keep his old phone and got to a concert. John weights out his options and feels that he would rather go to his concert and have his old phone, then to buy a new IPhone. The opportunity cost in our model would be the new iPhone 6s, the value of the opportunity lost. He lost the chance to have the new phone, but the benefits to John going to the concert is he enjoys himself. The cost would just be the price of his ticket and the chance to keep his phone rather the trading it

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