ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Opportunity cost refers to what you have to give up to buy what you want in terms of other goods or services. When economists use the word “cost, ” we usually mean opportunity cost. The word “cost” is commonly used in daily speech or in the news.

Detailed explanation-2: -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.

Detailed explanation-3: -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. 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).

Detailed explanation-4: -There are two types of opportunity cost-explicit and implicit. Explicit opportunity cost is easily identifiable and measurable costs. Implicit opportunity cost, on the other hand, is not as easily identifiable or measurable. It is usually the value of the next best option forgone.

Detailed explanation-5: -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.