ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -“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-3: -In economics, opportunity cost represents the potential gain that is lost when choosing one investment choice over another. In short, it’s a value of the road not taken.

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.

Detailed explanation-5: -The opportunity cost is the value of what you forgo to pursue something. The term describes the phenomena of choosing not to do something when you make a choice, as you give up one thing in favor of another. An example of opportunity cost might be when you choose between two brands of bread at the grocery store.