ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What are some other examples of opportunity cost? A student spends three hours and $20 at the movies the night before an exam. The opportunity cost is time spent studying and that money to spend on something else.

Detailed explanation-2: -Opportunity Cost Example Deciding whether to spend a gift card on a strawberry smoothie or a banana smoothie. Deciding whether to spend $7 every morning on coffee or consistently invest that money in a retirement account. Deciding whether to invest capital in refurbishing equipment or in better employee training.

Detailed explanation-3: -For example, choosing public transportation to travel to a particular destination by foregoing the option of traveling in one’s own car is a good example of opportunity cost, because you end up saving money which needs to be spent on fuel.

Detailed explanation-4: -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.