Opportunity costs represent the potential benefits that an individual, investor, or business misses out on when choosing one alternative over another.
As an example, to go for a walk may not have any financial costs imbedded in to it. Yet, the opportunity forgone is the time spent walking which could have been used instead for other purposes such as earning an income.
Economics Content Standards: Whenever a choice is made, something is given up. The opportunity cost of a choice is the value of the best alternative given up. Choices involve trading off the expected value of one opportunity against the expected value of its best alternative.
Simply put, the opportunity cost is what you must forgo in order to get something. The benefit or value that was given up can refer to decisions in your personal life, in a company, in the economy, in the environment, or on a governmental level.
Hypernym for Opportunity cost: cost of capital, carrying cost, capital cost, carrying charge.
Definition of trade-off 1 : a balancing of factors all of which are not attainable at the same time the education versus experience trade-off which governs personnel practices— H. S. White. 2 : a giving up of one thing in return for another : exchange. Other Words from trade-off Synonyms Learn More About trade-off.
Example of Marginal Benefit For example, a consumer is willing to pay $5 for an ice cream, so the marginal benefit of consuming the ice cream is $5. However, the consumer may be substantially less willing to purchase additional ice cream at that price – only a $2 expenditure will tempt the person to buy another one.Feb 4, 2022
People have unlimited wants and desires, the goods and services are limited in the economy and there is a scarcity. Due to this reason, it is necessary to make a choice. Since it is not possible to have everything that a person desires, hence they require making a choice.Jul 19, 2019
The study of economics may help you make better decisions. As with most things, the more informed a person is, the greater the chance that wise decisions will be made. If you study economics, you will learn how supply and demand affect things such as price, wages, and the availability of goods.Dec 4, 2021
Marginal benefit is the maximum amount of money a consumer is willing to pay for an additional good or service. The consumer's satisfaction tends to decrease as consumption increases.Mar 19, 2022
Scale of preference refers to a list of unsatisfied wants arranged in order of their relative importance. Ad. In other words, it is a list showing the order in which we want to satisfy our wants arrange in order of priority. Ad. The drawing of scale of preference will make it easier for choice to be made.
The opportunity cost of an activity is the value of the next-best alternative that must be forgone in order to engage in that activity. Hence, Option 4 is correct.