"Time is Money". The last time i heard this saying i never really understood what it meant. But as i studied more on the topic of opportunity cost i got to learn a little more about what the old saying meant.
What is Opportunity Cost?
The textbook definition of the term is; the alternative that is sacrificed in order to obtain something else. Lets say you have a choice between two jobs (both of which you equally like) but you only have the option of picking one. The reason for this is; scarcity. You cannot choose both jobs due to the little amount of time you have in your day. You would not be able to manage two jobs at the same time, therefore only one job can be chosen. You are stuck in a dilemma. If you choose job A you will be missing out on what you will experience in job B and vice versa. So in this case if you choose job A, your opportunity cost is not being able to choose job B.
How does this tie into 'Time is Money'?
VS.
Lets say Harveys was having there "Free Hamburger Day' and your lunch break was coming up. You could go drive 10 minutes to get the burger and another 10 minutes to get back to work. Or you can just go to the cafeteria in your building and buy your lunch there. The time and gas you spend in getting the harveys burger would not be worth the time and money you could save at the cafeteria. So in this case, you would have a high opportunity cost going to Harveys. The cafeteria on the other hand would give you a low opportunity as it saves you time, which in the end saves you the money you would spend on gas driving to get your free burger.
Lets say Harveys was having there "Free Hamburger Day' and your lunch break was coming up. You could go drive 10 minutes to get the burger and another 10 minutes to get back to work. Or you can just go to the cafeteria in your building and buy your lunch there. The time and gas you spend in getting the harveys burger would not be worth the time and money you could save at the cafeteria. So in this case, you would have a high opportunity cost going to Harveys. The cafeteria on the other hand would give you a low opportunity as it saves you time, which in the end saves you the money you would spend on gas driving to get your free burger.
How Opportunity Cost relates to Scarcity and Choice?
When it comes to Economics there are only a limited supply of resources that can satisfy a person's desires. Due to the fact that resources are scarce, we must use them wisely. Choosing between one thing or the other is a reoccurring theme in life that we must face, as we do not have the means to obtain both. Choice is a direct result of scarcity. To further explain the topic of scarcity here is a video about how it relates to water.
This video clearly shows how scarce the worlds fresh water supplies are and how important water conservation can be. Humans cannot live without water, therefore it must be consumed. But it is the amount we use that's important in conserving our water. The Opportunity Cost in consuming water is the depreciation of the worlds freshwater supplies. So next time you feel like letting your tap run, just think of this video.
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