I remember my econ professor. He was a real character, straight out of the comic books who had the uncanny ability of knowing how to explain subjects like supply and demand, market failure and production theory with ease, relating them to interesting examples and everyday scenarios. One subject, in particular, that has influenced the way I make decisions was his lectures on opportunity cost. In a nutshell, an opportunity cost represents what we have given up in the process of making a choice. For instance, when deciding on how to spend a hundred dollars a month, you may choose between taking a Muay Thai class or buying a new outfit. Based on this scenario, the opportunity cost would be that which you did not choose. So, if you choose to take a Muay Thai class, then your opportunity cost would be the new outfit. Likewise, if you choose to buy the new outfit, then the opportunity cost that you give up is learning Muay Thai. Certainly, the concept of opportunity costs can be applied to every choice we make. One way of looking at opportunity cost is deciding between two different places of training. For example, you can make a choice between learning Muay Thai or Karate, one Muay Thai facility over another, and one instructor over another, with the opportunity cost being that which you decide not to choose. In the process of making decisions, numerous factors come into play: your interest or preference in a particular Martial Art, your knowledge of the subject, your time constraints, your preferences, your personal budget, and so on. With all these choices having a flipside to it, the idea of knowing what your opportunity cost will be is a useful way of knowing how to make the most out of your choices. (more…)