My office-mate talked a lot. One of the thing he mentioned to me is about a story of a businessman who couldn’t afford to have a bus ride.
This particular businessman would like to travel from Utrecht to Nantes. He can go there by using 2 types of transportation. One is the bus and another one is the aeroplane. Although the bus fare is cheap, the businessman couldn’t afford it. Instead, he took the plane to Nantes, France.
Why was the businessman couldn’t afford the bus?
If you think about it, you might be wondering if the businessman took Ryanair or some cheap flight. Well, this is not the case. This is the normal fare ticket, which is higher than the bus fare.
In economic, time has its value. To travel from Utrecht to Nantes by bus can take up to 9 hours while by plane it can take around 45 minutes. In this case, the businessman was simply couldn’t afford the time of travelling to Nantes by bus, because he valued his time more.
Another example in real situation is a farmer trying to calculate the cost of rearing the young stock in his farm. In The Netherlands, the dairy farm is run by one person; the farmer himself. Since the farmer didn’t value his time doing the job in his farm, he might value his time (work) as none or very low. This is what we call an opportunity cost. So, imagine if he was asked about the costs of rearing his young stock from day 1 until 26 months old. He would simply didn’t calculate his time. This makes the total cost lower than what it should be.
A similar situation for me: A housewife, mother, wife but also a PhD student/ working mum. I valued my time working on my PhD/ work. So I choose to pay more for groceries (chopped veggies, cleaned chicken) and went to just 1 shop (which can be an expensive shop but with all the things I need) to save the time in preparing and cooking for my family. So, if you think that a housewife who wander around from shops to shops in order to have better bargain saves more, think again.
You might be surprised.