Opportunity cost meaning

Opportunity costs represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over another. ... Understanding the potential missed opportunities foregone by choosing one investment over another allows for better decision-making.

1. What is opportunity cost and example?
2. What is opportunity cost simple words?
3. What is an example of opportunity cost in business?
4. What are the two types of opportunity cost?

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 simple words?

Opportunity cost is an economics term that refers to the value of what you have to give up in order to choose something else. In a nutshell, it's a value of the road not taken.

What is an example of opportunity cost in business?

Opportunity cost, on the other hand, refers to money that could be earned (or lost) by choosing a certain option. For example, you purchased $1,000 in new equipment to manufacture backpacks, your number one product. That is a sunk cost.

What are the two types of opportunity cost?

The two types of opportunity costs are explicit opportunity cost and implicit opportunity cost. Explicit opportunity cost has a direct monetary value.