Question: What Is Opportunity Cost Simple Words?

What is the best definition of opportunity cost?

In microeconomic theory, opportunity cost, or alternative cost, is the loss of potential gain from other alternatives when one particular alternative is chosen over the others.

In simple terms, opportunity cost is the loss of the benefit that could have been enjoyed had a given choice not been made..

Why is opportunity cost called real cost?

Now, the option which is eventually chosen is obviously the choice, while the other one foregone in order the make this choice is regarded as the real cost. Now, the option which is eventually chosen is obviously the choice, while the other one foregone in order the make this choice is regarded as the real cost.

What is opportunity cost diagram?

Definition – Opportunity cost is the next best alternative foregone. If we spend that £20 on a textbook, the opportunity cost is the restaurant meal we cannot afford to pay. If you decide to spend two hours studying on a Friday night. The opportunity cost is that you cannot have those two hours for leisure.

Can opportunity cost zero?

Answer and Explanation: There are situations when the opportunity cost is equal to zero. They include: When there are no alternatives or where there is no choice.

Which situation is the best example of opportunity cost?

It is the important concept in economics and also the relationship which is between choice and scarcity. A good example of opportunity cost is you can spend money and time on other things but you can not spend time reading books or the money in doing something which can help.

What is opportunity cost simple definition?

Opportunity cost is the profit lost when one alternative is selected over another. The concept is useful simply as a reminder to examine all reasonable alternatives before making a decision. … Opportunity cost does not necessarily involve money.

What is an example of opportunity cost in your life?

A student spends three hours and $20 at the movies the night before an exam. The opportunity cost is time spent studying and that money to spend on something else. A farmer chooses to plant wheat; the opportunity cost is planting a different crop, or an alternate use of the resources (land and farm equipment).

What is opportunity cost the balance?

The Balance / Maddy Price. Opportunity cost is the comparison of one economic choice to the next best choice. These comparisons often arise in finance and economics when trying to decide between investment options. The opportunity cost attempts to quantify the impact of choosing one investment over another.

What is opportunity cost kid definition?

Opportunity cost is the value of the next best thing you give up whenever you make a decision. It is “the loss of potential gain from other alternatives when one alternative is chosen”. … The utility has to be more than the opportunity cost for it to be a good choice in economics.

What do mean by opportunity cost?

What Is Opportunity Cost? 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 foregone by choosing one investment over another allows for better decision-making.

What is the basic idea of opportunity cost?

The idea behind opportunity cost is that the cost of one item is the lost opportunity to do or consume something else; in short, opportunity cost is the value of the next best alternative.

Is opportunity cost a real cost?

The real cost is the price paid by the consumer for consuming a good. Opportunity cost is the foregone cost of the next best alternative present in…

What is opportunity cost explain with 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.

Which scenario is the best example of opportunity cost?

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.