1 / 4

opportunity cost

opportunity cost. When determining the cost of something, the pertinent comparison isn’t with zero – but with what you’d do with the money if you didn’t do it. . Cost of renting a house, vs buying?. Rent: $800/mo, say. Buying: $160,000, say. Break even point: after 200mos (18yrs)?

mary
Download Presentation

opportunity cost

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. opportunity cost When determining the cost of something, the pertinent comparison isn’t with zero – but with what you’d do with the money if you didn’t do it.

  2. Cost of renting a house, vs buying? • Rent: $800/mo, say. • Buying: $160,000, say. • Break even point: after 200mos (18yrs)? • But, you’d own the house, and never need to pay rent again, ever! (?) • But if you had $160,000 you could invest it for $4800/yr, or $400/mo. So break-even point is really 400mos. Opportunity cost of buying a house includes the loss of potential investment.

  3. how much does it cost to go to RU? • $8800/yr tuition, fees, books, supplies • $10000/yr room and board, transport, expenses But the best answer also involves what you’d do if you weren’t in school. • Get a job! • How much does it pay? • = $16,000/yr • * 40hrs/wk • $8/hr • * 50wk/yr • So, factoring in the opportunity cost of getting a job, • the real yearly cost of RU is: • $24,800/yr

  4. “investing in lifetimes” • But: after graduating college, you can get a better job. • Lifetime earnings w/ High School degree:$1.2million ! • Lifetime earnings w/ Bachelor’s degree:$2.1million !! So the cost of college is high, but the lifetime opportunity cost is a gain.

More Related