I am the one that takes the dog for his walks. Every time I grab his leash he is at the door waiting to be taken out. Also the dog has learned that my wife and I eat in the kitchen, so if anyone goes to the kitchen he follows. The other day the three of were sitting in the living room. My wife and I stood up. The dog stood up. I went to the door at the same time my wife went to the kitchen. The dog did not know which way to go. After a few second he made a decision and followed my wife to the kitchen.
He gave up a chance to go out in order to see if he can score some food.
This is a story on Opportunity Cost, and not a very good one if it ended there. I started to imagine the following story:
Observing this exciting behavior in the dog the economist in me took over and decided to measure this phenomenon (please remember this did not happen but I will pretend it did happen). My wife agreed to help me with my experiment. We agreed that every time one of us would go to the kitchen the other would go to the door with the leash. We would record the time and which way the dog went. Did he go to the kitchen or the door?While analyzing the data I noticed an interesting pattern. In the mornings and evenings he would go to the door and ignore the person going to the kitchen. What could explain this? Discussion…… Answer Diminishing Marginal Utility, Substitution effect and maybe Increasing Marginal Cost.
He is fed in the morning and evenings. After eating he is tired of food (Diminishing Marginal Utility). He is more interested in going out and smelling stuff (the substitution effect). Also there might be Increasing Marginal Cost to staying in the kitchen as he needs to relieve himself after eating. (I am not sure of this sentence)!
I have to work out the bugs out of this story.
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