ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -“Opportunity cost is the value of the next-best alternative when a decision is made; it’s what is given up, ” explains Andrea Caceres-Santamaria, senior economic education specialist at the St. Louis Fed, in a recent Page One Economics: Money and Missed Opportunities.

Detailed explanation-2: -Because of scarcity, every time we do one thing we necessarily have to forgo doing something else desirable. So there is an opportunity cost to everything we do, and that cost is expressed in terms of the most valuable alternative that is sacrificed….

Detailed explanation-3: -Principle #2: The cost of something is what you give up to get it. example: College education. The benefits are the job opportunities and personal satisfaction, but there are costs besides “out of pocket” costs like tuition and books.

Detailed explanation-4: -In economics, opportunity cost represents the potential gain that is lost when choosing one investment choice over another.

Detailed explanation-5: -A simple example of opportunity cost is to let us suppose that a person is having Rs. 50000 in his hand and He has the option to keep it with himself at home or deposit in the bank which will generate interest of 4% annually so now the opportunity cost of keeping money at home is Rs. 2000 per year as opposed to Bank.