What is an example of opportunity costs?
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.
What is opportunity cost simple example?
Examples of Opportunity Cost. Someone gives up going to see a movie to study for a test in order to get a good grade. The opportunity cost is the cost of the movie and the enjoyment of seeing it. The opportunity cost of taking a vacation instead of spending the money on a new car is not getting a new car.
What is meant by opportunity cost when speaking of real estate as an investment?
What is meant by “opportunity cost” when speaking of real estate as an investment? The return an investor could reasonably expect to earn from competing investments.
What is opportunity cost of an investment?
Opportunity cost is the value of what you lose when you choose from two or more alternatives. It’s a core concept for both investing and life in general. When you invest, opportunity cost can be defined as the amount of money you might not earn by purchasing one asset instead of another.
What are three types of opportunity cost?
Three phrases in the definition of opportunity cost warrant further discussion–alternative foregone, highest valued, and pursuit of an activity. Foregone Alternative: Opportunity cost is all about foregone alternatives, about not pursuing an activity.
How do you explain opportunity cost?
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.
How do you determine opportunity cost?
The formula for calculating an opportunity cost is simply the difference between the expected returns of each option. Say that you have option A—to invest in the stock market hoping to generate capital gain returns.
What is opportunity cost also known as?
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.
What are the 2 types of opportunity cost?
The two types of opportunity costs are explicit opportunity cost and implicit opportunity cost. Explicit opportunity cost has a direct monetary value.
Which best defines opportunity cost?
Opportunity cost is defined as the value of the next best alternative. In this case your next best alternative is to get a five-dollar dinner at Burger Joint.