What is opportunity cost and example?

When economists refer to the “opportunity cost” of a resource, they mean the value of the next-highest-valued alternative use of that resource. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can’t spend the money on something else.

What is opportunity cost definition?

Opportunity costs represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over another. … Understanding the potential missed opportunities when a business or individual chooses one investment over another allows for better decision-making.

What is an opportunity cost for dummies?

Sometimes choosing one alternative means losing money because you turned down another alternative. These costs are called opportunity costs. … Your opportunity costs result from income not earned because you decided to do something else.

Which best describes an opportunity cost?

An opportunity cost arises when a person has more than one option to choose. If the person chooses an alternative from the available choices, the opportunity cost is the benefit that might have been earned from the second-best alternative.

What is an example of opportunity cost in business?

Opportunity cost, on the other hand, refers to money that could be earned (or lost) by choosing a certain option. For example, you purchased $1,000 in new equipment to manufacture backpacks, your number one product. That is a sunk cost.

What is opportunity cost in Class 12?

Opportunity cost of an activity (or good) is equal to the value of the next best alternative foregone. It is the cost of foregone alternative.

Which scenario is the best example of an opportunity cost?

The correct answer is a. A computer company produces fewer laptops to meet tablet demand.

What are the types of opportunity cost?

The two types of opportunity costs are explicit opportunity cost and implicit opportunity cost. Explicit opportunity cost has a direct monetary value.

What is opportunity cost in Class 11?

Opportunity Costs are the benefits that an individual, investor or business forego (miss out) , when they choose one alternative over another. Opportunity Cost is the next best alternative, which is foregone, when a particular alternative is chosen.

What is opportunity cost with Example Class 11?

If an economy can produce rice 2000 quintals of rice or 4000 quintals of wheat with the given resources and the economy chose to produce wheat then the opportunity cost will be 2000 quintals of rice which the economy has sacrificed.

What do you mean by opportunity cost explain with an example class 11?

Opportunity costs can be viewed as a trade off. Trade offs happen in decision making when one option is chosen over another option. Opportunity costs sums up the total cost for that trade off. For example, a certain kind of bamboo can be used to produce both paper and furniture.

What is opportunity cost in economics Slideshare?

• Opportunity cost or economic opportunity loss is the value of a product forgone to produce or obtain another product. Opportunity cost analysis is an important part of a company’s decision-making processes, but is not treated as an actual cost in any financial statement.

What is an example of opportunity cost in your life?

Examples of Opportunity Cost. Someone gives up going to see a movie to study for a test in order to get a good grade. The opportunity cost is the cost of the movie and the enjoyment of seeing it. At the ice cream parlor, you have to choose between rocky road and strawberry.