ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Opportunity cost (also known as “alternative cost, ”) is the difference between a project’s cost estimate and another option that must be foregone in order to implement the project. Every choice we make also means giving up another option.

Detailed explanation-2: -The opportunity cost is time spent studying and that money to spend on something else. A farmer chooses to plant wheat; the opportunity cost is planting a different crop, or an alternate use of the resources (land and farm equipment). A commuter takes the train to work instead of driving.

Detailed explanation-3: -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. The evaluation of choices and opportunity costs is subjective; such evaluations differ across individuals and societies.

Detailed explanation-4: -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.