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Oppertunity cost.
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When a decision is made among a number of alternatives the benefit that is lost by choosing one alternative over another is the?
Opportunity Cost
What are some examples of opportunity cost?
Opportunity cost is divided in to further two cost:Implicit cost and explicit cost Suppose there is a man who has two options to earn 1. To go abroad 2. To start a business of printing from the capital which he had in amount of 1.4million Now if he refuses the option of not to go abroad but from economics point of view he also refuses the income which he earn if he goes abroad He tolerates this income indirectly.But if he choose 2nd option he has to pay for starting the business In this case implicit cost is the choosing of first option and explicit cost is the choosing the second option In other words explicit cost can be defined as the cost which is paid for acquiring resources
This is the value lost when one alternative is chosen over another?
Opportunity Cost
Is opportunity cost the rate of return available to an investor for a given level of risk?
No!Opportunity cost is the cost (sacrifice) forgone (or lost) as a consequence of choosing one option over an alternative that may be equally desired. Thus, opportunity cost is the cost of making one choice rather than another. Every action has an opportunity cost! And it is not restricted to only monetary or financial matters: when a person chooses one leisure activity (option 'A') rather than another that was equally desirable (option 'B'), they 'lose' the pleasure etc that would have been enjoyed had they chosen option 'B'. This 'loss' would be the 'opportunity cost' of making choice 'A'. The exercise of choice invariable restricts the chooser from making certain other choices. There are many mutually exclusive choices in life. A person who chooses to marry does so at the 'cost' of the advantages and freeness of singleness. In economics, 'opportunity cost' is a very important concept, because it forces the decision maker to evaluate, not only the benefits of pursuing a certain course, (e.g. course 'A'), but also to evaluate the direct loss of other opportunities that could be taken if course 'A' is not taken. For example, an investor may decide to put all his money into financing a particular project. But, by using the 'opportunity cost' concept, he also is well aware that he does so at the 'opportunity cost' i.e. the cost of lost opportunity, the opportunity to get, perhaps bigger or more secure returns elsewhere.
How could opportunity cost be examined?
Opportunity cost is the cost of the next-best choice available to someone who has to pick between several choices. It is a key concept in economics used to describe "the basic relationship between scarcity and choice". Opportunity cost is examined by selecting one option and then comparing the expected rewards of that option to the rewards of next option. If a company had money to invest in either marketing or production the opportunity cost of one would be the loss of benefit form not picking the other. For example if the company chooses to invest in marketing instead of improving manufacturing (its next best option) which would increased profits $100000 the opportunity cost of the decision is said to be $100000. If the company makes more than $100000 the company has made a good decision. If the increase in marketing does not make $100000 for the company the decision is considered not at as good as the lost opportunity-cost. It would have been more profitable to invest in the option not selected.
When a decision is made among a number of alternatives the benefit that is lost by choosing one alternative over another is the?
Opportunity Cost
the potential economic benefits that are lost by making one choice instead of another are called what?
Opportunity costs
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