Chapter 1: Ten Principles of Economics- Principle 2: The Cost of Something Is What You Give Up to Ge
Explored in the second principle of economics is the idea that people make decisions, and the cost of what is given up when making the decision is not always apparent. However, identifying the cost is tricky, as the trade-off is not always a tangible item. The cost of what you give up is known as the opportunity cost of an item. This idea of the opportunity cost of an item can be examined further when considering to play a sport in high school, or in the life of Elon Musk.
Now examining a more specific example that you may face when in high school, look at at the opportunity cost of playing a sport in high school. What is given up to play the sport is the time spent relaxing or doing homework, but gained is new teammates, exercise, and the enjoyment of the sport. Creating a comparison chart between the gains and losses often helps making the decision easier. Then forming questions that assess the magnitude of each gain/loss can be the final step in making the decision. For instance, in the case of the high school student, deciding whether they can find time to complete their work should be a self-assessed factor in their choice. Thus, the opportunity cost can be a factor in a student's daily life.
Beyond sports, famous people like Elon Musk have faced this principle of economics. After Mr. Musk's immense success with merging Confinity and X.com to form PayPal, he faced a hard decision. His two options were to start another internet company or invest his money into other ongoing projects that he saw had potential. Of course, he weighed his options and saw that investing in upcoming projects would yield greater returns than a brand new internet company, so he put $100 million forward towards SpaceX, $50 million towards Tesla, and $10 million towards SolarCity. While SpaceX fell soon after, Tesla soared. Thus, the principle: the cost of something is what you give up to get it comes to show in Musk's success, highlighting how this idea is prevalent in real life.