Discussion Essay 1: Opportunity Cost Mary Woodbury Hooper describes opportunity cost as, “...the value of an option that was not chosen in a choice between two or more mutually exclusive options. Opportunity cost measures the value of a missed opportunity...”(“Opportunity Cost”). To explain, in my family we choose to make our own yogurt instead of buying it from the store. Buying yogurt from the store would be the opportunity cost in this example. Buying the yogurt is the next best alternative to making the yogurt, or the missed opportunity. My family came to this decision by implicitly weighing marginal cost and marginal benefit. Michael Mazzei describes marginal cost as, “an economics calculation that represents the change in total cost
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The scenario provided was of a buggy whip business owner. During his time as an owner of these leather buggy whips, he finds that his business is soon to be obsolete. In Schumpeter 's theory this owner will lose his business, unless he takes action to create a new business. My solution would be to switch from a buggy whip business to an entirely new business in making leather whips. The opportunity cost is to carry on with his old business until it eventually is destroyed. This destruction of business is applied to Schumpeter 's creative destruction because the owner now can reinvent, or create, his business to make leather belts since he already has the needed leather to make the belts. A down side would be that he would need to buy the metal for the belt buckle. Opportunity cost is the next best alternative option. The examples of opportunity cost are buying yogurt and staying in the same business. We can analyze opportunity cost by looking at the marginal benefit, or the satisfaction the homemade yogurt gives us, and the marginal cost, the time spent making homemade yogurt. All of these can be graphically presented in a Production Possibility Curve, PPC. Opportunity cost is closely related to Schumpeter 's Creative Destruction Theory, where the opportunity cost is the given up value of the business to create a new
The scenario provided was of a buggy whip business owner. During his time as an owner of these leather buggy whips, he finds that his business is soon to be obsolete. In Schumpeter 's theory this owner will lose his business, unless he takes action to create a new business. My solution would be to switch from a buggy whip business to an entirely new business in making leather whips. The opportunity cost is to carry on with his old business until it eventually is destroyed. This destruction of business is applied to Schumpeter 's creative destruction because the owner now can reinvent, or create, his business to make leather belts since he already has the needed leather to make the belts. A down side would be that he would need to buy the metal for the belt buckle. Opportunity cost is the next best alternative option. The examples of opportunity cost are buying yogurt and staying in the same business. We can analyze opportunity cost by looking at the marginal benefit, or the satisfaction the homemade yogurt gives us, and the marginal cost, the time spent making homemade yogurt. All of these can be graphically presented in a Production Possibility Curve, PPC. Opportunity cost is closely related to Schumpeter 's Creative Destruction Theory, where the opportunity cost is the given up value of the business to create a new