ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Because scarcity exists, people must choose between alternatives. People face identical opportunity costs when making decisions. Opportunity costs are roughly the same for everybody. Trade-offs are another way of talking about opportunity costs.

Detailed explanation-2: -The simple definition of opportunity cost is: Opportunity Cost is the benefit foregone related to the alternative choice when a decision is made. In other words, an opportunity cost is the regret you anticipate from not taking another option.

Detailed explanation-3: -Consider that opportunity cost does not typically account for intangible things, such as emotional benefits or time spent. Situations that involve these variables may use opportunity cost as one part of the decision-making process, but you may wish to consider the other effects of your decision in this case.

Detailed explanation-4: -Consumers consider opportunity costs when they perceive immediate resource constraints and when they use limited-use resources (i.e., resources that may only be spent on particular products); planners chronically consider opportunity costs even when they do not face immediate constraints.

Detailed explanation-5: -In business, opportunity costs play a major role in decision-making. If you decide to purchase a new piece of equipment, your opportunity cost is the money spent elsewhere. Companies must take both explicit and implicit costs into account when making rational business decisions.