ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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.

Detailed explanation-2: -Buying 1, 000 shares of company A at $10 a share, for instance, represents a sunk cost of $10, 000. This is the amount of money paid out to invest, and getting that money back requires liquidating stock. The opportunity cost instead asks where that $10, 000 could have been put to better use.

Detailed explanation-3: -“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.

Detailed explanation-4: -Examples of Opportunity Cost. Someone gives up going to see a movie to study for a test in order to get a good grade. The opportunity cost is the cost of the movie and the enjoyment of seeing it.