What is opportunity cost in economics with example?
What is opportunity cost in economics 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.
What is the formula for opportunity cost?
Return
You can determine the opportunity cost of choosing one investment option over another by using the following formula: Opportunity Cost = Return on Most Profitable Investment Choice – Return on Investment Chosen to Pursue.
How economics define 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 when a business or individual chooses one investment over another allows for better decision-making.
What is the other name for opportunity cost in economics?
Economic cost
The alternative name of opportunity cost is Economic cost.
What is opportunity cost in economics 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.
What is an example of an opportunity cost?
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 economics quizlet?
opportunity cost. the most desirable alternative given up as the result of a decision.
What is PPF and opportunity cost?
An opportunity cost will usually arise whenever an economic agent chooses between alternative ways of allocating scarce resources. A PPF shows all the possible combinations of two goods, or two options available at one point in time. …
Why is opportunity cost important in economics?
The concept of Opportunity Cost helps us to choose the best possible option among all the available options. It helps us to use every possible resource tactfully, efficiently and hence, maximize economic profits.
What is CBSE 11th opportunity cost?
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. Some Examples on Opportunity Cost.
Which is the best definition of opportunity cost?
Closes this module. Opportunity cost is the value of something given up to obtain something else. In this video, we explore the definition of opportunity cost, how to calculate opportunity cost, and how the PPC illustrates opportunity cost. Created by Sal Khan. This is the currently selected item. Posted 9 years ago.
What is the mission of the Khan Academy?
Our mission is to provide a free, world-class education to anyone, anywhere. Khan Academy is a 501 (c) (3) nonprofit organization. Donate or volunteer today!
What happens to the PPC when opportunity costs increase?
When there are increasing opportunity costs, the shape of the production possibilities curve (PPC) is bowed out. Learn more about how the shape of the PPC, which is sometimes also called the production possibilities frontier curve (PPF), depends on opportunity cost in this video.
When does the opportunity cost of a good remain constant?
when the opportunity cost of a good remains constant as output of the good increases, which is represented as a PPC curve that is a straight line; for example, if Colin always gives up producing 2 fidget spinners every time he produces a Pokemon card, he has constant opportunity costs.
