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: -Opportunity cost is the value of the best opportunity forgone in a particular choice. It is not simply the amount spent on that choice. The concepts of scarcity, choice, and opportunity cost are at the heart of economics. A good is scarce if the choice of one alternative requires that another be given up.

Detailed explanation-3: -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-4: -In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives.

Detailed explanation-5: -Opportunity cost is the value of what you lose when choosing between two or more options. Every choice has trade-offs, and opportunity cost is the potential benefits you’ll miss out on by choosing one direction over another.