#econ23

Matthew Stank ID#94688618

What exactly is opportunity cost?

Opportunity cost is the potential benefits that an individual or a business misses out on when choosing one alternative over the others. Opportunity cost is not just a fundamental concept in economics, but it is also a prominent component that dictates our everyday lives.

In your daily life, you are constantly confronted with decisions and choices, such as waking up early to attend lectures or sleeping in and watching recorded lectures later. This decision can lead to different outcomes and influence how your day is going to be. Sleeping in means that your day starts later and you have less time to accomplish what you set out to do that day, which can lead to you sleeping late and waking up later the next day just to repeat the same process until you decide to wake up early. This highlighted the concept of opportunity cost and its influences on other decisions/outcomes of your life. 

I will now discuss the decisions made and the opportunity cost of my usual daily routine on a Friday. (These decisions are based on the choices that I made today at the time I am doing this project.)

On Friday, I have classes from 10:00 am- 2:00 pm and I tend to wake up around 6:30 am to eat and workout at the gym before going to class. This is the first opportunity cost that I faced.

Wake up early, eat, and work out.

Sleep in and work out later in the afternoon.

I decided to wake up early at the cost of some more sleep. However, if I chose the latter, I would have to make up for the missed gym session and spend time later to work out, costing me time that I could otherwise use to study for doing things that I enjoy. If I decided not to work out entirely that day, I would then be disappointed in myself. This illustrated the ideas of how decisions and opportunity costs can snowball into other effects that can further influence your day. 

After working out, I have 3 options:

Cut the workout session short to shower and head to class.

Go home, shower, and head to class late.

Go the class and shower later.

I chose to shower and be late for class. The opportunity cost here is that I would miss out on some important information that the professor said at the beginning of the class. However, I can ask a friend to relay that information to me. So, there aren't any opportunity costs of being late to class aside from the guilt of walking in late.

After the lecture, have a gap period before a lab and I can choose between 2 options:

Relax by eating and watching YouTube.

Eat after I get home from lab and do homework.

But no one like to do homework so I often choose to relax before lab. From choice, I get to enjoy my time and the trade-off is I have to do my homework when I get home later, lessening my free time at home.

After lab, I have 3 options:

Be proactive and stay on campus in the library to complete homework.

Go home and rest.

Hang out with friends. 

Going out with friends here would mean that I lose the time that I can rest and do homework as well as the money that I am going to spend while out with them. However, nothing is more important than some good quality time with friends so I decided to do homework and rest can wait while I hung out with my friends.

While going out, we got hungry and decided to find a place to eat. We narrowed it down to 3, In and Out, Korean BBQ, and ramen. We then decided what to eat by voting. I prefer In and Out over Korean BBQ, Korean BBQ over ramen, and In and Out over ramen. The trade-off of my preferences is that In and Out is cheaper but it is the farthest from where we were. Thus, the opportunity cost of my choice is that I would have to spend more time traveling further and in return, I save money to use it elsewhere. On the other hand, my friends all agree that they prefer In and Out over ramen, Korean BBQ over In and Out, and ramen over Korean BBQ. However, this preference is irrational (not transitive) as they contradicted themselves by liking ramen, their supposed worst option over Korean BBQ, their supposed best option. As a result, I was able to convince them to go to In and Out.

After the fun, I looked at the clock and it was already 8:00 pm and I hadn’t even started my homework assignments. So I hurried back home and started working immediately. This is the opportunity cost of my decision to eat and rest during the break on campus and hang out with friends afterward. As a result, I have to rush my homework, putting stress on myself and potentially getting a bad grade on the assignments. So in the end, I trade fun for stress as the opportunity cost of previous choices. 

Now it is midnight, and I can either choose

Think about my mental health and sleep early.

Sleep late and be tired the next day.

And of course, like any college student, I decided to sleep late as it was the weekend after all. Staying up late allows me to catch up on video games while sacrificing my sleep which I would eventually regret when waking up the next day.

In conclusion, opportunity cost is crucial in decision-making not just inside of the economic world but also in your daily life. Understanding that time is a limited resource and you need to decide how you want to spend it to maximize productivity and enjoyment.

Econ 23, Tuesday 7:00pm

Name: Quan Le

In the past year or so, I’ve gotten myself into the hobby of collecting and writing with fountain pens. To me, the benefits of fountain pens are the smoothness of writing, the ability to write with as little pressure as I want, fewer hand cramps when writing in cursive, and the elegantly intricate design of the nibs.

In the past few decades, the demand for fountain pens in the United States has declined, mainly due to the introduction of a substitute good; disposable ballpoint pens. A far cheaper alternative, disposable pens be found all across the United States in schools, offices and wherever a pen is needed. For reference, 60-pack of BIC Round Stickers Xtra Life ballpoint pens will cost you a THIRD (roughly 7 dollars) of an entry level fountain pen. Despite this, many countries around the world, such was Switzerland, Japan and Germany still use fountain pens and some even require it in lower level education.

The prices of fountain pens vary from brand to brand, with some, such as Pilot and Kaweco, offering entry-level pens at around $20 and others, like Montblanc, providing high-end luxury pens above $1000 dollars. The reasons for these prices is due to the average total cost of producing these pens, with most pens using steel nibs and plastic feeds while others opt to use more costly materials such as gold nibs and ebonite feeds. The fountain pen market has many companies such as Pilot, Sailor, and Kaweco, each producing similar but differentiated products. Because of this, the fountain pen market should be considered a monopolistically competitive market.

Additionally, fountain pen enthusiasts are able to buy, sell, and trade pens with other enthusiasts. This can come in handy since many fountain pens simply aren’t produced anymore. A wonderful example of this is the Pilot Myu, a sleek design with an integrated fountain pen nib, it is a prized addition to any fountain pen enthusiast’s collection. Unfortunately it was discontinued long ago and with the drop in supply, the demand for such a pen has risen significantly alongside the price.

Fountain pens also contribute to several other markets, by increasing the demand for other complementary goods. These include fountain pen friendly notebooks that prevent bleed through and feathering of ink, as well as bottled inks and pre-filled ink cartridges that allow for unique colors and customization within one’s writing.

The impact of using fountain pens is nothing grand, it won’t solve world hunger or end wars. It does however, contribute far less to the pollution caused by disposable plastics. Most fountain pens are made of materials that will last lifetimes if cared for properly. The nibs and feeds of fountain pens can also be replace if damaged, or can be sent to a ‘nibmeister’ to be repaired. Additionally, pre-filled ink cartridges can either be replaced by ink converters to use bottled ink, or can simply be refilled with a syringe, resulting in far less plastic waste compared to the disposable ballpoint pens mentioned earlier.

Mark Rangel

20875590

As a little bit of context, I started living on my own in Irvine last fall when UCI classes started moving back to in-person. That meant I had to learn to feed myself for the first time, which was a wild ride to say the least. Originally the plan was to start learning to cook for myself, but as luck would have it, the wok I brought down from Northern California proceeded to start peeling after I used it once which meant that had to be put on hold. So with that option out of the picture I discovered the wonderful world of delivery, aka Grubhub.

The pandemic meant a lot of my decisions had all these awful additional externalities I had to start thinking about. We learn about opportunity cost, the things we give up when we make one choice over another, and the pandemic makes evaluating those opportunity costs a lot more complicated. Every decision I make has to take into account the fact that there’s a dangerous and very contagious disease going around. Beyond simply the monetary cost, there’s a social and health cost as well. Getting food from campus or picking up food from a restaurant came with the added risk of exposure to COVID. So when I look at my two major choices at the time: delivery or pickup (cooking would have been a third option if my pan was usable), I had the following albeit overly simplified situation.

Cost of Delivery                 Cost of in Person Pickup

Price of Food                        Price of Food

Delivery Fee                         Risk of Human Contact

From a purely monetary standpoint, my opportunity cost of choosing delivery is the money I’d be saving from not paying a delivery fee. Our world isn’t purely about money however and if I were to choose to get food in person, I would have the opportunity cost of staying home and safe from COVID. 

While I frame the “Risk of Human Contact” as a cost of getting food in person, delivery actually sort of gets a positive externality from the pandemic. Contactless delivery confers a social benefit since it reduces the risk of spreading COVID. From an economics perspective, this meant my “private” demand for delivery was lower than the socially optimal value. For my budget at the time, I couldn’t really afford to only eat delivery, but the value of delivery was much higher than how much I could pay for.

If this was on the scale of a government, I maybe would have received some kind of subsidy to allow me to pay for more delivery and shift my personal demand curve to the optimal value. In reality, I just achieved this by asking for a little extra money from my parents to pay for a few more delivered meals. The effect on my demand curve was the same regardless.

Duc Tran (ID: 58914218) Discussion Section: Wed.11-12 pm

Over the past couple of decades, cell phones have transitioned from a luxury good to a necessity. Advancements in technology have allowed people to become more connected than ever through the power of the Internet. Walking around Ring Road at UC Irvine, you’ll see many students browsing their phone, messaging others on Facebook, taking pictures for Instagram and Snapchat, and looking at memes on Reddit.

Although cell phones in general are now considered a necessity, high-end smartphones can be viewed as a luxury good. Purchasing an expensive, new, high-end smartphone is a tough financial decision for many people, especially for college students.

With the ever-increasing cost of high-end smartphones, such as the Apple iPhone, Samsung Galaxy, and Google Pixel, it can be hard to justify spending so much money on such a product.

When I initially placed my pre-order for the new Samsung Galaxy S10 a few weeks ago, I didn’t think much of the microeconomic concepts behind the decision. However, it became clear that my decision to purchase the phone can be explained through the ideas that have been discussed in the class.

Weighing the Costs

Implicit Cost (Opportunity Cost: Time)

Before switching to the Galaxy S10, I had been using the Galaxy S8. Over the last month or so of using the Galaxy S8, I had a major software issue with the phone in which it kept on restarting randomly. I knew that I would have to get this issue fixed eventually, whether it be by going to a repair shop or by sending the phone in to Samsung support. After calling customer support, I also realized that this process could potentially take quite some time. The opportunity cost of not buying the Galaxy S10 was the time and effort it would’ve taken for me to get my S8 fixed.

Explicit Cost (Monetary)

There are three versions of Galaxy S10: Galaxy S10e, Galaxy S10, and Galaxy S10+, starting at $749.99, $899.99, and $999.99, respectively. As you can see from the comparison chart below, each version has slightly different specifications and features.

After discussing the costs of the phone with my two friends who were also interested in buying the Galaxy S10, it was clear that none of us would pay the explicit cost of $900 for the phone. Why would people want to pay that much money when they already have a perfectly usable phone?

Incentives

Companies like Apple and Samsung are fully aware that most people currently using older generations of their products do not want to pay the full price of a new product. This is where incentives become a factor. According to the textbook, one of the main principles of economics is that people respond to incentives.

Trade-in offers are a common incentive in the smartphone market. A trade-in offer is exactly as it sounds like: you trade in an eligible smartphone and receive a discount based on the market price of the phone that you traded in.

At the time of pre-ordering the new Samsung Galaxy S10, I had been using the Galaxy S8, which I had purchased back in August 2018 for a sale price of $350. With the trade-in offer promotion that I received, I would be able to trade my Galaxy S8 in for an effective discount of $390 towards a new Galaxy S10. 

Another incentive that Samsung offered customers who pre-ordered the Galaxy S10 or Galaxy S10+ is a free set of the new Galaxy Buds, which are wireless earbuds. Samsung is promoting their new Galaxy Buds as a substitute to the Apple Airpods. The Galaxy Buds retail for $129.99, which makes it cheaper than the Apple Airpods, which cost $159.00.

Since I was already planning on purchasing a set of Apple Airpods in the future, the new Galaxy Buds caught my immediate attention. The offer of a free set of Galaxy Buds was a positive incentive for me to pre-order the new Galaxy S10.

The Decision

After weighing both the implicit and explicit costs and also considering the extra incentives that Samsung offered for pre-orders, I ultimately decided to buy a Galaxy S10. Along with the implicit cost of not buying the S10, the incentives that Samsung offered for pre-ordering their new phone plus the actual phone itself made me choose to pre-order the phone instead of keeping my S8 and having to fix it. In other words, the perceived benefits of pre-ordering the phone outweighed the the amount I paid for it.

Sources

Aiden’s Lessons of Microeconomics.

link: https://Pixton.com/ic:6n8uojao