Opportunity Cost – Economics & Nutrition

In economics there’s a concept called “Opportunity Cost”. Investopedia defines this as “The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action”. For example, the cost of choosing to go to University instead of starting work doesn’t just include fees and living expenses; it also includes the opportunity cost of what you could have being doing instead. In those three years you could have started a career and perhaps earned a couple of promotions, so the opportunity cost is the value of that alternative course of action.

In business, when a bespoke order is manufactured incorrectly and has to be rectified then the cost is not simply the original cost, plus what is costs to put it right, but there is also the opportunity cost of the money you could have been earning instead of correcting the mistakes.

It takes 10 hours to make order X

Order X Sale Price = £10,000
Minus manufacturing cost = £7500
Profit = £2500
Minus labour & material cost of correcting errors £500
Profit = £2000
Minus time taken that could have been spent on making order Z £500
Profit = £1500

So, it’s actually doubly expensive to correct the order – due to the opportunity cost.

Now, what’s all this got to do with health and fitness? Well, let’s take snacking on a Twix as an example.

In fitness, most people think of snacking on junk in terms of how fat it will make them, but that’s only half the cost. It’s also a missed opportunity to eat some chicken or drink a protein shake. So, not only does it contribute to higher body fat, it’s also a missed opportunity to gain muscle. The missed opportunity cost makes it twice as costly in terms of detracting from your goals.

So, next time you think about snacking choices, remember that it might be twice as detrimental to reaching your goals as you thought it was – due to the opportunity cost!