Question

Opportunity cost of 2 concerts: A person has the option to go to 2 different concerts. They value Concert A at $240 and Concert B at $165. To get to concert A, it would cost $103 in gas and to get to concert B, it would cost $5 in gas. Also, if they were to go to Concert B, they would get 2 less hours of sleep than if they were to Concert A. Given this information, what is the total opportunity cost of going to Concert A? Concert B?

Answer 1

Answer - The opportunity cost of going to concert A is to go to concert B. As the total cost of going to concert A is ($240 + $103) $343 and total cost of concert B is ($165 + $5) $170 which is almost 50% less that total cost of going to concert A. To get the same utility consumer will be spending more on concert A than on concert B, the consumer saves ($343 - $170) $173 by spending only $170.

Thus, the consumer will choose concert B as they will get same utility by sacrifising less than concert A. Consumer have to spend $343 to go to concert A which is the total cost and consumer have to spend $170 to go to concert B. Although the consumers will get 2 hours less sleep but still concert B is more profitable to the consumer as they have to pay almost 50% cost over the total cost of Concert A.