Opportunity Cost
Definition
Opportunity cost refers to the value of the next best alternative that is forgone when making a choice. It represents the trade-off between different options.
Analogy
Imagine you have $10 and you can either buy a movie ticket or a pizza. If you choose to buy the movie ticket, your opportunity cost would be the pizza because you gave up the chance to enjoy it.
Related terms
Scarcity: Scarcity refers to limited resources in relation to unlimited wants, which leads to choices and trade-offs.
Trade-off: A trade-off occurs when choosing one option means giving up another option.
Marginal Cost: Marginal cost is the additional cost incurred by producing or consuming one more unit of a good or service.
"Opportunity Cost" appears in:
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Study guides (3)
Additional resources (3)
Practice Questions (6)
Opportunity cost refers to?
What is the opportunity cost if a student chooses to go to a movie instead of studying for an exam?
Why is understanding the concept of opportunity cost important for individuals and societies?
What is the opportunity cost of a decision?
When opportunity cost is constant, the production possibilities curve appears as?
How to calculate opportunity cost of the 1st product?
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