Name-Agnibesh Mukherjee.
Class- PGDM(Finance), Sec- D.
Roll- PGDM12F004, Class Serial No- 4.
Economics Assignment- Opportunity Cost Lets start with a small introduction to the topic Opportunity Cost. Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative forgone (that is not chosen). It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices. The opportunity cost is also the "cost" (as a lost benefit) of the forgone products after making a choice. Opportunity cost is a key concept in economics, and has been described as expressing "the basic relationship between scarcity and choice". The
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Explicit costs are opportunity costs that involve direct monetary payment by producers. The opportunity cost of the factors of production not already owned by a producer is the price that the producer has to pay for them. For instance, a firm spends $100 on electrical power consumed, their opportunity cost is $100. The firm has sacrificed $100, which could have been spent on other factors of production. Now lets look at some real life examples from my life inorder to understand Opportunity Costs better.
Opportunity Cost Examples that I myself have been across- I have only Rs 1000 to spend and I have two choices, I can eat at a nice restaurant or buy a good cricket bat instead. I spend my Rs 1000 on buying the cricket bat, then the opportunity cost of that choice is the delicious meal I did not choose and let go.
Opportunity Cost also works in regards to time. Eg- I only have two hours of free time. I could either go to a movie or meet a friend of mine. I choose to spend my time at the movie, the opportunity cost of this decision is the time I could have spent enjoying the company of my friend.
Here 's another example- When for the first time I decided to invest my saved money lying with me.I had two options that I could do with the money I had. My first choice was either investing in Mutual Funds or leave the money in a Savings Account that earns only 5% per year. I invested
Opportunity cost means giving up something of value or importance to you to achieve a particular goal or outcome. It is a chance that causes you to miss out on something you want, but an individual can benefit by gaining something for the opportunity they accepted.
For each choice I make, there is an opportunity cost. Opportunity cost is the real cost of an item, what I must give up in order to
Every day of our lives, we make choices. Some of these choices are very difficult, while others might be so easy that they are subconscious. Each decision we make comes with a downfall. That is the next best option we could have chosen or what we call the opportunity cost of making the decision that we did!
There are two kinds of errors people make when trying to decide what the right thing is to do, and those are errors in estimating the odds that they're going to succeed, and errors in estimating the value of their own success.
In economics, costs can be defined as the price paid to acquire, produce, accomplish, or maintain anything. (Dictionary.reference.com, retrieved 4/6/09). Cost can be the amount paid or required in payment
Consumers use cost-benefit analysis in order to maximize utility. They do this when they are faced with a decision to make. They list the costs of the product, make a list of pros and cons for the product, and they compare costs and benefits to other locations that have this good and see which is larger. Consumers make different decisions when using this process because some goods have a larger pros list than cons and vice versa.
When most of us think of the words opportunity cost, price, production, and service, we think of something related to obtaining or giving something. According to Merriam-Webster, opportunity cost is defined as, the added cost of using resources (as for production or speculative investment) that is the difference between the actual value resulting from such use and that of an alternative (as another use of the same resources or an investment of equal risk but greater return). Price, is defined as the amount of money that you pay for something or that something costs. Production, is defined as the process of making or growing something for sale or use, and lastly, service, is defined as, the occupation or function of serving. Milton Friedman, an American economist, would say, nothing in live is free, that is, if you want something, you have to give something. These four words can all be tied together and used to give and receive. We can either use it to our benefit or simply perform it. We could get the most out of life using these four words, opportunity cost, price, production, and service, by primary accepting that everything in life is obtained at a cost, acknowledging that they can be used as forward-looking concepts, and agreeing to do everything yourself instead of hiring someone to do it in your place.
2. The cost of something is what you give up to get it. - It means comparing cost and benefits of alternatives. When people choose one thing, they give up something else -> opportunity
What are opportunity costs? Give an example of an opportunity cost. Opportunity costs are the things that you give up when you make a choice. You may choose to buy a piece of clothing that you want and pass on buying expensive coffee drinks at the local coffee place for a few weeks.
Opportunity cost is the value of the next best alternative in a decision. Imagine that you have $150 to see a concert. You can either see "Hot Stuff" or you can see "Good Times Band." Assume that you value Hot Stuff's concert at $225 and Good Times' concert at $150. Both concerts cost $150 per ticket, but it would take you a couple of hours to drive to Hot Stuff's concert and you have to be in school (the next) morning for an exam. Good Times' concert is right here in town. Explain how you would assess the opportunity cost of seeing Good Times in concert. What is the opportunity cost of going to Good Times' concert?
-The opportunity cost of something is what you must give up of one thing, in order to get it. Opportunity cost is a key concept of economics because it is described as expressing the basic relationship between scarcity and choice. Opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently.
Parts of opportunity cost are explicit costly (money spent along the project to make it happen, for the task to be done perfectly money and labor need to be involved, e.g. Boss paid workers for their project, students pay tuition to enroll in class and all other amenities involved.) and implicit cost (one’s time value or origin in the next best alternative. The time incorporated in order to run out the next best option).
The cost of something is what you give up to get it. Opportunity cost is defined by
In general, cost means the amount of expenditure (actual or notional) incurred on, or attributable to a given thing.