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: -Implicit costs (also referred to as implied, imputed or notional costs) are the opportunity costs of utilising resources owned by the firm that could be used for other purposes.

Detailed explanation-3: -Opportunity Costs help in maximising economic profits, and help in deciding efficient utilisation of available resources. Resources like capital, labor, land are not infinite; they are limited.

Detailed explanation-4: -Opportunity cost represents the cost of a foregone alternative. In other words, it’s the money, time, or other resources you give up when you choose option A instead of option B. The goal is to assign a number value to that cost, such as a dollar amount or percentage, so you can make a better choice.

Detailed explanation-5: -The concept of opportunity cost states that the cost of one item is the value of the next best option; in other words, the cost of one item is the value of the lost opportunity to do or consume something else.