It all depends on circumstance. A lot of college degrees are not relevant to the current market, so by finishing college, you only get in debt. On the other hand, critical understanding and chasing opportunities can lead to much better success in life. But as Sprouts state, opportunities cost, as money so as time.

College: 4,080,000 Income after 34yrs 252,000 Lost wages in 6yrs 144,000 College tuition and living expenses 1,224,000 Living expenses after College 2,460,000 Total actual profit Family business: 1,680,000 profit after 40yrs $780,000 difference over 40 years However, going to college vs not going is not purely a financial cost/benefit question. There are other factors that might be hard to quantify: growing a family brand or business and potential franchises, being close to your parents/family in their later years, following what makes you happy vs what makes you profits, paying back interests on loans, developing management, people and business skills earlier in life, etc. Both paths have pros and cons beyond the financial aspect.

Support us to make more econ videos at www.patreon.com/sprouts

IMPROVED Estimates: (thanks to Anthony Zheng) College route: $2,712,000 after 40 years Family business: $1,680,000 after 40 years ONLY IF SHE - Enrolls to the right field - Receive the SAME SALARY from start - Gets the job ON TIME - Family business remain on FIXED Earning - The business doesn't flop AND + The job ends up with pension, but family business doesn't + Next generation don't have to start from scratch ( ...constructive criticism requested)

I chose to become a private music teacher over studying physics. This allowed me to teach from home, chose where I live and work less hours.

Opportunity cost is such a useful concept. It can't always be calculated with money, but it teaches you to weigh the long-term costs and gains of every decision--even non-financial ones. For example: should you invite someone you don't like to a party? If you do, their presence will make the party less enjoyable. If you don't, their sibling whom you like will stop being your friend. Which is more valuable to you? Enjoyment of the party or the sibling's friendship?

The moral of the story is college can be a successful tool if used properly or can be financial the ball and chain attached to your leg. Opportunity cost is a simple way to decide which outcome has the best mathematical outcome. Still, it can be an oversimplified tool if all of the pros and cons aren't correctly added to the equation.College has a host of benefits that are not necessarily linked to direct expenses or wages, therefore, the college must be viewed as a circumstantial tool of choice for economic progression, but it is one of our society's greatest status symbols. It's often the cost/benefit of a choice that is not explicit that often has the greatest impact.

Don't forget to calculate the interest on the loans, which depending on the conditions of the loan, can add up to more than you can earn in a lifetime.

Instead of teaching gender selection in schools, kids need to learn skills to work and live in the real world. Parents need to encourage and teach responsibility as well.

There is something can not be calculated, so just follow your intuition and interest, and treat what ever you choose seriously

Man I've been following this channel for almost an year, these guys make amazing content with very neat illustrations and narration, I still wonder why they have such less subscribers and especially such less views and likes...These Fellas deserve so much more

The obvious answer for the young lady in your example is only fans model. Glad you did this, too few people appear to factor this concept into their thought process.

The family business is best option given the opportunity to make more from what you already have is obvious, branching out in to new areas and so on, where as being employed, you are tied to a system that you can't be as flexible as you want to be in... so the family business is better option... assuming your family are upstanding citizens with an ethic that is to work for the group not themselves...

I have learning difficulties and have always struggled with education. Therefore, I choose to travel instead of studying and could always pick up casual jobs in the hospitality industry. With the experience and skills I have gained whist working these jobs, I have been able to work my way up to a manager position with a decent wage. For me, this way of living suits me so much more than going to school to study and struggling trying to do the work while at the same time loosing money.

I am also in this stage of thinking of opportunity costs. I am a design graduate and professional and I find design considered a skill domain when compared to traditional domains such as STEM which is viewed as an academic domain.

What about Community College or Trade School?

I'm a little disappointed that this video didn't discuss the other costs of going to college - the emotional/mental. Will you feel more fulfilled in a college-educated career, or not? Would it be more helpful or hurtful to your long term mental health to go through the often stressful coursework to earn that degree? Also, going to college doesn't guarantee a better job. Just ask my dad. :(

You might want to consider the value of experience. In many careers, experience is far more valuable than anything else. If you go to college for four years, that's four years of experience you did not get. Also, college costs way more than tuition. There is the cost of books, and a huge number of miscellaneous fees. You cannot qualify for most social programs if you are in college.

The opportunity cost of college isn’t the first four years of work (everybody has the first four years of work), it’s the last four years of work, when you are making the most money. By skipping college you get to work four more years longer. Many people go to college specifically to skip those years.

I attempted the calculations and here's what I got: If she earns $3500/year by missing out on college, and college is $2000/year, and it takes 6 years to finish, then we have: 3500x6 = $21000 - opportunity cost and 2000x6 = $12000 - college cost. That means that she would be "losing" short-term 21000+12000 = $33000 by going to college in the 6 years. After college she would earn 7000x34 = $238000 total in 34 years. If she were to not go to college and work for $3500 a year for 40 years, then she would make 3500x40 = $140000. It would obviously be better for her to go to college, as she would be losing out on 238000-140000 = $98000. Please tell me if my calculations are correct.

a lot of people if not the majority do not use their college degrees in their current job which amounts to a waste of money and a waste of time. In my friend group only one of my friends actually is in the profession he got his degree in and is still in school going to turn 27 -28 by the time he graduates spend 10 years of college graduate specialization out of almost literally all of my friends. he's going to be a veterinarian.

Hi i have a questions tomorrow is exam day and is calculations in grade7 ?

Costs & benefits outside of monetary?

I’m a plumber for my dads business he wants me to take over but I’d rather make song lyric videos all on my iPad for small singers anywhere at anytime then eventually build a record label and provide career opportunities for others in the same field. Easier said than done I know lol. Any recommendations?

The greatest weakness of opportunity costs is the problem of hindsight and limited information. You may end up on management position after college, but job market may also change when you are in college, ending up in you working as a waiter despite college degree. Of course if you knew what will happen it would be a lotta easier...

The cost of going to school and getting a degree as a doctor is $2,784,000, after all of the math has been done. The cost of staying with the family business is $1,680,000, after all of the math has been calculated. So going to school would be the better opportunity. However, economics also uses ceterus paribus which only accounts for two variables at a time and not all of the variables at once. Because of this many of the comments are correct that the opportunity cost is based on more than just money. However, the first step in the process would be to factor in the money and then take that variable along with another variable using ceteris paribus and then figure out the opportunity cost again and continue doing that until you have factored all of the variables.

If she goes to college she will spend $144000 on tuition plus expenses and miss out on earning $252000 from family business. Total opportunity cost for going to college is $396000. However she will earn a total of $2856000 as opposed to $1680000 in the family business. The cost of not going to college is $1176000 which is the difference between the two nett salaries, even if the other one has a 6 year head start. 😢

1032000 sacrifice to work for her family.

Cost of tuition and living per month = $ 2,000/per Month Duration of studies= 6 Years= 72 Months Total expense for studies= 2000*72= $144,000 Working in Medicine for 34 Years Earning per month = $10000 Monthly expense= $3000 Net monthly income= 10000-3000=$7000 Total income in 34 years= 34*12*7000=$2,856,000 Actual income she will get by choosing medicine= 2856000-144000=$2,712,000 The actual income she will get by choosing the Family business=40*12*3500=$1,680,000 So financially the better decision is to take medicine

Life lesson, opportunity cost is giving up something to gain something. Sometimes it’s a lost rather than a gain, so only make calculated moves in life.

There are no practical comparisons possible here!

Interesting

Easy, 2000×6×12= 144,000+ 34×3000×12= 1368,000 Profit= 340,000×12-114,000×12= 2,712,000 She gets 3500 per month in family biz, 42000 per year in family biz for 40 years 1,680,000 Doctor is better opportunity. Provided she does not make a more profitable investment than 10% which is Max in the states on NBFC and other funds during the six years with 1,680,000. Interests on income of 252,000 for six years is say 10% interest per annum on investment then the extra earning is 25200. Means she earns 1680,000+ 25200= 1,93,200. Even the doctor brings more income.

Ok so, correct me if I'm wrong: A waiter makes 20 thousand dollars (without tips) yearly without any college degree. A Turkish student who is in top 10 colleges within a practical major makes hardly thousand dollars monthly after having graduated with PhD degree. That's nearly 8-9 years of education that pays even lower than someone who is born in a "better" environment. That my friend is both stupid and grim for anyone who is root bound to thier country. We are all international people nowadays and it's getting more and more desperate for those who are in 2nd to 3rd world countries with ideals and sense of justice. Thank you for reading

running a family business will be beneficial

if she stays with the family business she will earn 1.680.000 USD if get degree in medicine she will spend 396.000usd tuition + miss opportunity - the years she works which is 4.080.000 USD so she will get 3.684.000 USD, so it will be better to get the degree.

From my calculations, seeking medicine career is the best for her.

Can you make a video on the same problem on india

waste of time & energy too

While there's some truth to the video's premise it doesn't account for the whole picture. What's the added value of working directly after high-school versus accumulating debt (assuming you'll need to accumulate debt to finance higher education) in order to pursue a university degree? The equation is not as narrow as what's the economic trade off in terms of what you'll earn during the duration of the program and the cost of the program. In the instance you forgo taking on debt to finance a higher education, it should go without saying your options will be limited when it comes to the range of employment you could opt for right out of high school. In other words, your options will consist of roles with menial pay. But, you'll also gain skills and experience on the job. The thing is, your net take home won't be sufficient to save and the skills you'll develop will not be high leverage skills. Skills which have strong return on their investments. Moreover, the skillset which you'd acquire in this tier of the marketplace will only have vertical application. They wouldn't have the capacity to be employed across horizontally (I.e within different tiers of the marketplace which offer more substantial income opportunities) So the added value of pursuing work right out of high school is an immediate salary along with a low paying skillset. There's really two dimension in this case. If however you consider the added value of taking on debt to pursue higher education the equation yields a different result. For the sake of this premise, let's assume of course the person approaches their studies in earnest. The marketplace rewards credibility. By earning a degree, (all degrees do not focus on high leverage skills which is an important variable to highlight) A) you build the foundation of a high yield skillset. B) you earn credibility with which you can persuade prospective employers to enlist your brain and potential in premium tiers of the marketplace. C) The modern economy is a closely integrated value chain and so by attending university you also enrich your roladex which has a seperate ROI of its own later in your career. And D) you enhance your optionality by pursuing a high education with a focus on a high leverage skillset because you can employ your skills set across a broad spectrum and within different tiers of the mark place. And so when you run the proverbial numbers, taking on debt to finance a degree with a focus on a high leverage skillset has both draw backs and upsides. The opportunity cost is for you to decide. What are your highest values?

What is the family business is a hospital ?

best option is doing your own work and don't have limit to what u can earn

Please Sprouts... You have been doing great. But for this video you need to be more critical and cover the topic indepth. Give us more and details objectivity. Rather than just defining Opportunistic costs..

One small note: certain biases are present in this animation - usually these are great @Sprot, but this particular one may be an example of authorship bias; who can spot them?

the difference is 73 dollars between the med student and the business person

I might not be accurate in my button punching in my calculator app on Windows, but $2,712,000 (Doctor) vs $1,680,000 (family business) after 40 years is a no-brainer

No matter what you choose, it pays to have a rich parentage... It's up to you to be more better than them in life.

2kx12x6 = 144000 = cost of school 10kx12x34 = 4.08 million = total monetary profit from being a doctor 3kx12x34 = 1.224 million total living expenses 4.08 million -144000-1.224 million = 2.712 million remaining income from medical school path 3.5kx12x40 = 1.68 million total monetary profit from family income 2.712 mill - 1.68 mill = 1.032 million profit from medical path

Educative

Helpful!

The correct choice is whatever will make her happier.

Opportunity costs are not necessarily financial.

If you work 20 hours a week at starbucks, they will pay for your entire tuition through Arizona State University.

It looks like she can retire six years early if she attends college, as well as make more money. Her monthly expenses aren't too bad compared with her monthly income.

Opportunity of 1 116 000

Saya ga bgitu mikir soal opor ini

Commitment = high opportunity cost!

I generally like your videos but this was PURE propaganda. I am going to spend 120K to get a job as a restaurant manager? An MD will live on 3K a month? You know a family business pays a family member 3500 USD for LIFE? I'm a professional podcaster, long career in corporate America, made six figures since I was 25. No college, ever. Today I make more in my "family business" than most Family Practice Doctors. You guys need to redo this one, big time.

She will loss 86K if continues family business.

what if you don’t work, but gave birth to a genius and spent thousands of dollars for her?

Learn by T F D…

College route= $226,000 Cash in 40 years Family business= $140,000 Cash in 40 years Assuming that she actually get the job right after college and actually earns that much, COLLEGE is better financial choice.

Lol why in service black girl?)

There is also emotional cost, which wrecks every rich female soul into an empty and shuttered shell.

Don't rob banks lol

A Very Small Amounts utilize their Expensive Degrees so what's the point wasting So Much On that Useless Paper

I liked how the fat guy gave her a dustbuster whereas the other guy was going to give her a diamond ring. Perhaps she even knew what her boyfriend was going to give her but couldn't resist seeing what was in the bigger box

If I hadn't gone to college, I would instead have done something stupid and lost a trillion dollars, and also not had the joy of a college degree. For "opportunity cost" to have ANY PRACTICAL USEFUL meaning, you would have to know for certain, somehow, that, that hypothetical would have occurred had you not taken the alternative you did. THAT happens only with DETERMINISTIC PHYSICAL events. NOT ones that depend upon OTHER PEOPLE'S CHOICE: such as whether SOMEBODY ELSE **MIGHT** HAVE GIVEN YOU A JOB WITH A BIG SALARY.

But I could hypothesize uncountably infinitely many hypotheticals for any alternative I DO take. My opportunity cost AND BENEFIT -- if I were not sitting here typing on my computer right now, I COULD earn a trillion dollars and create peace in the Middle East and replace Putin with a democratic leader, OR, I COULD cause an asteroid to hit earth and kill 8 billion persons. So... yeah... there's a cost to my sitting here and to my choosing to spend thousands of dollars attending college compared to some hypothetical better outcome, but there is also a benefit to my sitting here and to my choosing to spend thousands of dollars attending college: the benefit compared to asteroid hitting earth and killing 8 billion persons.