Opportunity costs

The concept of opportunity costs helps in making rational decisions or evaluating alternatives. Opportunity costs describe the loss of benefit that one experiences because of a decision for a certain alternative.

Assuming you could earn €20 in an hour and prefer to watch TV instead, the cost of watching TV is the €20 you lose (plus the pro rata cost of electricity and the depreciation of the TV). If opportunity costs are taken into account, it is also understandable why it can be quite rational for top athletes, for example, to drop out of school or give up studying: For them, the opportunity costs of education in the form of lost income are much higher than is normally the case.