An interesting concept I ran across in economics is something called the “No Free Lunch Principle,” else known as the scarcity principle. It refers to the fact that although we have boundless needs and wants, we are all limited by the resources available to us. As a consequence of this scarcity, trade-offs are necessary – there is no such thing as a “free lunch”. Even lunches that are given to you for free, is actually incurring you a cost – the cost of another opportunity foregone – that is you could have spent that time doing something else or be somewhere else.
Time is something that falls into the limited resources category. An example they gave in class, which I thought was quite clever was the fact that if Bill Gates found a $100 note on the ground, would he bother to pick it up? As you know Mr Gates is the richest man in the world, and is apparently earning approximately $250 per second – so my guess is that it is not worth his time to pick it up – by the time he bends down, picks it up, he would have already made anywhere up to $1000. However, he, like the rest of us, is subjected to a ticking clock also – there is only 24 hours in a day.
This brought me to think about the whole scarcity issue… I started playing around in my head with the “what if” questions to find any loopholes in this scarcity principle. And… I think I found one! As the no free lunch principle states that by doing something, you forgo the opportunity to do something else – so what happens when you are on the dole?! Firstly, you are receiving benefits from the government (no cost to you whatsoever, you are getting benefits for doing nothing. Opportunity cost foregone? Well…. not really when you didn’t want to find a job in the first place… you wanted to be a dole bludger remember?. You are limited by the amount of money you get though, but if your needs and wants are minimal, you shouldn’t have a problem!). Secondly, by receiving that payment, which is electronically deposited into your account so you don’t actually have to physically go to Centrelink to get it – it doesn’t waste your “time”. Lets say that you do actually have to go and physically get the money even… if you are on the dole, you really couldn’t be “busy” with your time to forego something else important ie no opportunity cost.
The only thing I couldn’t limit is the time factor – I have managed to block everything else… Now if we only had Justin Timberlake give us more hours in our life for survival then everything will be just dandy!
March 29th, 2012 at 8:44 pm
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April 7th, 2012 at 6:30 pm
Sure?!
February 22nd, 2013 at 5:38 am
Great article. If I might also add. Begin by investing
just a small amount into a particular stock. Do not invest all of your capital or
savings. If you see that the stock is profitable,
then you can begin to invest more. By investing
too much all at once, the chance of you losing out on large
amounts of money increases.
February 25th, 2013 at 6:45 pm
Great information, also.. Penny stocks are extremely volatile.
This means the price of these stocks is changing on a constant basis.
Therefore, if you plan on investing in penny
stocks, it is important that you set up an exit plan,
and when the time comes to exit, ensure you stick to
this plan.
July 18th, 2013 at 2:22 pm
Keep tax rates in mind when purchasing stocks.
When you purchase a share and you keep it for more than a period of one
year, you are going to be taxed at the rate of a long term capital gain.
However, if you sell the stock before the one year is finished,
you are going to be taxed at the normal tax rate.
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