Question

Maradona is, for those of you who don't follow football, history's best football player, as evidenced by his majestic goal against the Brits (do yourself a favour and google it... but after the test, of course). Suppose Maradona had the chance of setting up a football academy, which he would run himself and would occupy all of his time. He could set it up in 86, which was the peak of his career and footballing prowess. The monetary operating costs of running it at that time are fairly low (there is alot of land available, there isn't alot of technology to invest into the academy, etc). Alternatively, he could set it up in 1998, a year after his definitive retirement. At that time land is scarcer, and technology needs are higher, so the monetary operating costs of the academy would be higher. However, an economist argues that it is cheaper for Maradona to run his academy in 98 than in 86. Question: explain why an economist would claim it is cheaper to run the academy in 98 than in 86.

Answer 1

Answer: The answer lies in the concept of Opportunity cost.

Opportunity cost: The next best alternative use of the resource.

Sceneraio 1: In case if maradona decided to setup his Football Academy at the time when his career was at peak, at that time it will be difficult for a Maradona to manage his time if he set up that Academy, as he has to denote his precious time in order to setup and run that academy, it will reduce his focus on his career and other activities ( Brand ambassador , Advertisement, sponsorships) that can lead to serious consequences as far as his performance in football is concerned as well as his finances. therefore it was a huge risk to setup Academy while having a career at peak , therefore it is having a very high opportunity cost .

Scenario 2: if he decided to set up his Football Academy after the retirement he has already achieved all the accolades, huge amount of money from games, advertisement ,  sponsorship and various other ways therefore he has enough time to utilise and contribute in setting up of Football Academy , therefore scenario 2 is much better because here the opportunity cost of setting up a Football Academy is very less.