What is opportunity cost give example?

What is opportunity cost give 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 an example of opportunity cost in business?

Small businesses factor in opportunity costs when computing their operating expenses in order to provide a bid or estimate on the price of a job. For example, a landscaping firm may be bidding on two jobs each of which will use half of its equipment during a particular period of time.

What is your opportunity cost in life and why?

In economics, opportunity cost is the cost of not choosing the next best alternative for your money, time, or some other resource. Life requires of you to make choices among mutually exclusive alternatives. Every time you select something, you forfeit other alternatives and the concomitant benefits.

What is opportunity cost easy 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 foregone by choosing one investment over another allows for better decision-making.

What are three types of opportunity cost?

Three phrases in the definition of opportunity cost warrant further discussion–alternative foregone, highest valued, and pursuit of an activity.

Which scenario is the best example of opportunity cost?

The correct answer is a. A computer company produces fewer laptops to meet tablet demand. Opportunity cost defines the benefit obtained by having a commodity after forgoing some other commodity. In the problem statement, the computer company incurs an opportunity cost of laptops for tablets.

What is opportunity cost simple definition?

What is opportunity cost formula?

The formula for calculating an opportunity cost is simply the difference between the expected returns of each option. Say that you have option A—to invest in the stock market hoping to generate capital gain returns. In other words, by investing in the business, you would forgo the opportunity to earn a higher return.

What are the types of opportunity cost?

This distinction gives rise to two types of opportunity cost–explicit and implicit.

• Explicit Cost: This is an opportunity cost that involves a money payment and usually a market transaction.
• Implicit Cost: This is an opportunity cost that DOES NOT involve a money payment or market transaction.

What is the types of opportunity cost?

This distinction gives rise to two types of opportunity cost–explicit and implicit. Explicit Cost: This is an opportunity cost that involves a money payment and usually a market transaction. Implicit Cost: This is an opportunity cost that DOES NOT involve a money payment or market transaction.