The subject of costs in economics is a trivial concern because as simple as it looks, costs assume many forms and applications. As conventionally defined, cost means the amount of money paid for a certain product or service. According to Encyclopedia Britannica (par. 1), cost “in common usage, (is) the monetary value of goods and services that producers and consumers purchase.” What make the concept of cost challenging in microeconomics is the diverse types or classifications attached to it. Since microeconomics encompass the study of the behavior of individuals, firms, and industries in terms of producing and consuming of economic goods and services, the concept of cost is relevant as it affects microeconomic activities of the units concerned. For consumers and individuals who are not familiar with the concepts of costs, one might have the tendency to discard this as irrelevant and immaterial. However, close examination of these underlying theories would enlighten consumers on their effects on prices and quantities of goods which are normally offered to the public. This concept is also relevantly applicable to the health care industry.
It is interesting to note that in economics, all costs are considered opportunity costs. As rationalized by Petroff (2002, par. 2), resources are usually indented for a particular purpose. When goods are produced using a definite resource, other goods could not be produced using the same raw materials. To use a practical application, for a consumer who decided to buy a television set, the opportunity cost could be the value of a trip to a nearby beach resort which was not taken due to the purchase.
In health care, the concept of opportunity cost is best exemplified by the number of years in terms of lives saved and the improvement in the quality of life should monetary resources be spent on an alternative medical intervention suggested or recommended for a diagnosed health care procedure.