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 the opportunity cost for your life?
Opportunity costs can impact various – and critical – aspects of your life, including money, career, home and family, and other lifestyle elements. In general, it means
having to choose one option over the other, be it money, time or lifestyle choices
– and living with the consequences.
What are the three examples of opportunity cost?
- Someone gives up going to see a movie to study for a test in order to get a good grade. …
- At the ice cream parlor, you have to choose between rocky road and strawberry. …
- A player attends baseball training to be a better player instead of taking a vacation.
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 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 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 easy definition?
How is opportunity cost defined in everyday life? “
Opportunity cost is the value of the next-best alternative when a decision is made; it's what is given up
,” explains Andrea Caceres-Santamaria, senior economic education specialist at the St. Louis Fed, in a recent Page One Economics: Money and Missed Opportunities.
Why is opportunity cost important?
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 are the types of opportunity cost?
- 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 opportunity cost of a decision?
Opportunity cost is
the value of what you lose when you choose from two or more alternatives
. It's a core concept for both investing and life in general. When you invest, opportunity cost can be defined as the amount of money you might not earn by purchasing one asset instead of another.
How opportunity cost is applied in our daily life?
They are applicable beyond finance and accounting. In daily life, opportunity costs are
the benefits or pleasures foregone by choosing one alternative over another
. For instance, if you decide to spend money eating out for dinner in a restaurant, then you forgo the opportunity to eat a home-cooked meal.
What is opportunity cost and its importance in decision making?
“Opportunity cost is
the cost of a foregone alternative
. If you chose one alternative over another, then the cost of choosing that alternative is an opportunity cost. Opportunity cost is the benefits you lose by choosing one alternative over another one.”
What is the opportunity cost of a particular product?
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. For example, you have $1,000,000 and choose to invest it in a product line that will generate a return of 5%.
How does scarcity affect opportunity cost?
This concept of scarcity leads to the idea of opportunity cost. The opportunity cost of an action is
what you must give up when you make that choice
. … Opportunity cost is a direct implication of scarcity. People have to choose between different alternatives when deciding how to spend their money and their time.
What is a real life example of scarcity?
A wildfire temporarily causes pollution in a city, leading to a scarcity of clean air.
Coal is used to create energy
; the limited amount of this resource that can be mined is an example of scarcity. A day has an absolute scarcity of time, as you cannot add more than 24 hours to its supply.
What is sunk cost example?
A sunk cost refers
to money that has already been spent and cannot be recovered
. A manufacturing firm, for example, may have a number of sunk costs, such as the cost of machinery, equipment, and the lease expense on the factory.
