Question

One of the scarce resources that constrain our behavior is time. Each of us has only 24 hours a day.

How do you go about allocating your time in a given day among competing alternatives? Once you choose the most important use of time, why do you not spend all your time on it? Use the notion of opportunity coat in your answer.

Answer 1

According to economic theory, a marginal utility principle should be used to optimize time division. Because marginal utilities are not known in real life, the opportunity cost of that time can be used as its marginal cost. The division should therefore be such that the opportunity cost of two competing options should be compensated for. Using the whole time on one option is tantamount to being at the time constraint corner.

As more and more time is spent on one activity, this activity's opportunity cost increases in terms of other operations

By using decision-making to maximize production, I allocate my time in a specified day among competing options. I look at how much time I have for each option and how much time I have to allocate. I'm trying to split my time between options so I can be as effective as I can. I need to consider the price and benefit of a specific option to weigh the options. Once I choose the most important time I don't spend all my time on that activity because as more and more time is spent on one activity, that activity's opportunity cost increases in terms of other operations.