 Sometimes, a new exciting opportunity presents itself when we are completely happy about our existing life situation. If that happens, we are forced to think about opportunity costs. This is because when we look at the new opportunity, we compare it with our current situation and think about what is at stake if we would go for it. This often happens without us being able to see the full picture. These define opportunity costs as the benefit we forgo as we trade off one alternative for another, hoping we make the best choice. Although they are often less obvious and sometimes speculative, opportunity costs can be huge, therefore learning about them makes sense. Imagine that we are trying to calculate the true cost of going to college. One factor can be tuition, which in our case is $10,000. Since that's our only cost, you might conclude that the cost of college is $10,000 a year, but to economists, that's not quite right, because we have to add the money we could have earned by working instead of attending college. Let's say that by working full time in a local restaurant, you can earn $20,000 a year. The true costs of going to college are, therefore, $10,000 tuition plus $20,000 in opportunity costs. By studying for a degree, we trade off $30,000 a year, although that's only half the story because it also goes the other way around. Assuming we go to college for four years, we trade off $120,000 for an education that leaves us with empty pockets, many ideas, and a degree. However, once we are better educated, we might be able to make $40,000 as a manager instead of the $20,000 in service. In such a case, not going to college ends up being much more expensive. Do you understand the concept? Show us! Calculate the opportunity costs of a high school student who drops the idea of earning a degree in medicine and instead chooses to help in the family business. The cost for tuition and living is $2,000 a month. It takes a total of six years to finish university. After obtaining her degree, she works in the field of medicine for 34 years earning $10,000 a month and spending $3,000 on monthly living expenses. If she is entering the family business, she earns $3,500 right away for the next 40 years with zero living expenses. What's financially the better choice? What's your calculations in the comments below? This and all other Sprouts videos are licensed under Creative Commons. That means teachers from all around the world can use them in classrooms, online courses or to start projects. And today, thousands already do! To learn how it works and download this video with out ads or background music, check out our website or read the description below. If you want to support our mission and help change education, visit our Patreon. That's patreon.com slash sprouts.