Opportunity Cost Explained

The Annals of Improbable Research, perhaps the finest general-purpose scholarly journal today, has published a satire by Yoram Bauman of Greg Mankiw’s 10 principles of economics (from his introductory economics textbook). Most of it is hit-or-miss, but his summary of Principle #2 is a brilliant satire on the concept of opportunity cost.

Opportunity cost is easy enough to understand in simple descriptive situations, but I have never seen a precise mathematical definition of it that didn’t make it seem like a contentless idea.

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