Domnick Virgillo (Spring 2011 Section 1)
As I am writing this assignment, I can’t help but think of the other multiple times I have sat down to write this assignment but didn’t. Instead of writing this assignment, I decided to work out, grab something to eat, play video games, work on other homework, hang out with friends, take a nap, check my email, get on Facebook, read the news and watch TV.
But why am I writing the assignment now? Why haven’t I written the assignment any time in the past month? The answer is simple; the marginal benefits equal the marginal costs.
To understand this, you must understand opportunity cost and relative price. See, opportunity cost is the value of the next best alternative given up when a choice is made. So when I decided to do something else instead of writing this blog, the blog is the opportunity cost. Opportunity cost is expressed in relative price, which is the price of one choice relative to the price of another. So any of the activities listed above had a higher ‘relative price’ than writing this blog assignment at the time.
However, writing the assignment now has a higher ‘relative price’ than any other activity. Again this is because the marginal benefits equal the marginal costs. Marginal benefit refers to what people are willing to give up in order to obtain one more unit of a good, while marginal cost refers to the value of what is given up in order to produce that additional unit. So my marginal cost on writing this assignment would be my time spent on writing this assignment, because that is what I’m willing to give up. The activities listed above would be what the time would have been spent on, so the benefits have to equal the activities and the time. The marginal benefits are: I get the assignment done and don’t have to worry about it anymore, I have a possibility to acquire bonus points for this assignment, and I’ll have nothing left to do for Spring Break. I have now reached the point where my marginal costs equal my marginal benefits; therefore, I am writing this assignment. In the past month, my marginal cost (time) outweighed my marginal benefit, so I kept putting the assignment off.
When our marginal benefits equal the marginal costs that’s when we reach our maximum net benefit. Now my costs and benefits in this decision might be different than yours; however, my wants and needs have been met based off of my OWN rational self-interested decision.
Sources:
http://en.wikipedia.org/wiki/Opportunitycost
http://www.netmba.com/econ/micro/cost/opportunity/
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I think this post is interesting to consider because most of our classmates can relate to it. For example, I'm sure a lot of our class handed in the assignment at the beginning of the semester in order to get extra credit points. For those students, the MB equaled the MC; therefore, they did the assignment then. On the other hand, I'm sure a few students have yet to turn in their blog due to the fact that their MB doesn't equal the MC. To those students, not doing the project has a lower opportunity cost. I think this idea can also relate to the order in which we decide to do different projects. For example, before I wrote my blog, I did a lot of things which I felt were more important, or had a higher benefit. For instance, I wrote a paper which was due before the deadline for the blog. Overall, I thought looking at this blog for a comparison to MC, MB, and OC was an interesting idea.
By: Tiffani Rossi
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