Whenever we select a career path, job, partner or subject to study we are losing an opportunity when taking the second option. Sometimes option 2 might be a better or worst fit.
In other words, the opportunity cost is the cost of losing out on an opportunity taken when choosing another opportunity.
It’s like having to choose between eating a muffin or an ice cream, In case you choose the muffin you lose the opportunity of eating the ice cream and vise versa
Basically opportunity cost is important as it creates a concept of benefit out of your time, an example is waiting in line at a restaurant, here you are trading with yourself over something else like the pizza you want to buy. So the actual cost of that pizza you are eating is the pizza + the time wasted waiting in a line.
The opportunity cost of becoming a doctor
Although medicine is a noble and useful career to take up, choosing to become a doctor also has its downsides.
The concept of opportunity cost plays a big role in decision making and whether opting into medicine is a good idea or not.
When applying for medical school you are applying for a career that is more or less a one-way road to a particular job and future opportunity. However what happens if on the road you learn something new about yourself? That is the concept of opportunity cost of choosing one career path.
However what are you giving up when taking up one career path over another?
Medicine although being a very valuable career path, might not be for everyone.
Taking up one career for all your life might not only be challenging but also make you lose out on some other opportunities along the way.
On one hand, medicine provides a stable, respected job where you can have an impact on another person’s life but also at the cost of opportunity.
Over time jobs have evolved and the way we think is so also evolving.
The creation of new opportunities is always on the rise and learning and looking out for your next venture is never off the books!
Therefore its important to take into consideration the risk of your next job or location move as this might impact your opportunity.
How opportunity cost can determine your happiness
The outcome you choose is determined by your own decision making!
The opportunity of choosing one option over another can lead you towards the gain of one opportunity or the loss of another opportunity.
While taking a well-paid job in a small town might seem like a good idea it might also reduce your options as you might become more isolated.
However looking at another possibility it can also help to open up new experiences too.
So the loss or gain of opportunity comes down to action.
Happiness is determined by how your reality meets your expectations.
If you have high expectations of living in a small village than your happiness can suffer and the opposite is also true. If you have high hope living in a big city and then you are working like 90hrs per week living in a small place and working less would lead to greater happiness.
How do we calculate the opportunity cost?
The cost vs benefit of a decision we take is called a cost-benefit analysis, basically the calculation includes what is lost/ what is gained.
This cost-benefit analysis is a great tool when opting to take on a decision especially a hard one. Most of our life decisions are all cost/benefits of a situation and our brain tries to opt and take the more sensible option gaining the most valuable outcomes from a decision.
Formula for opportunity cost:
Lost /gained = Opportunity Cost
A great example is to imagine that you are being offered a position in a comfortable office job while having a salary of 50,000 euros vs teaching English abroad for a salary of 22,000 euros.
The financial opportunity cost of teaching English over the boring office job that pays well would be 50000/22000 = 2.27 however this alone might not be justifiable as we need to quantify fulfillment.
Of course, our subjective opinion is harder to justify than direct credit or income levels, hence on a scale of 1 -10 we can quantify our fulfillment of working for a company over another company and when we compare the opportunity cost vs the fulfillment of a job position we can justify out move.
It is sometimes impossible to make meaningful life decisions just by using such a simple formula, however the use of such formulas can be a valuable tool when deciding over the cost/benefit of a situation, the great thing about these tools is that they can be used both for simple calculations or in broader decision-making process.