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16 January, 06:29

Suppose, as your birthday gift, your best friend give you a 4-day general admission ticket for Bonnaroo 2018 with a market value of $554.50. What is your opportunity cost of going to Bonnaroo this year using the free ticket?

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  1. 16 January, 07:28
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    Cost of 4 days time: In terms of earnings sacrifised from those working days, or any qualitative value of that time.

    Explanation:

    Opportunity Cost is the cost of next best alternative sacrifised while choosing an alternative.

    It might be material, immaterial.

    Eg1: Working at Job1 with salary 10000, having other job option with salary 8000. Opportunity cost of Job1 is Job2 salary. Eg2: Me preferring Chapati over rice, opportunity cost of consuming Chapati is rice' satisfaction.

    Eg 1 has material (monetary) opportunity cost i. e salary. Eg 2 has immaterial opportunity cost i. e satisfaction.

    Admission ticket for Bonnarro would have had opportunity cost = its price i. e $554.50 as the amount sacrifised to get that. However: as given the ticket is gifted free; the opportunity cost of that is 4 days time sacrifised to attend it. The value of that sacrifised time may be in form of : - earnings lost from those 4 working days sacrifised (material); or 4 days time to be spent with family sacrifised (immaterial).
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