Define opportunity cost
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Posted by Yogesh Saini 6 years, 11 months ago
- 4 answers
Mohd Abdulla 6 years, 11 months ago
Gaurav Seth 6 years, 11 months ago
An opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action. In other words,
the cost of enjoying more of one good in terms of sacrificing the benefit of another good is termed as opportunity cost of
the additional unit of the good.
Example: We have Rs 15,000 with two choices a) to invest in the shares of a company XYZ or b) to make a fixed deposit
which gives interest 9%. If the company XYZ gives a return of 15%, we will benefit when we invest in the shares as the
alternative would be less profitable. However if company’s return is only 3% when we could have made a return of 9%
from FD, then our opportunity cost is (9% - 3% = 6%).
Vansh Rastogi 6 years, 11 months ago
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Dheerendra Kalani 6 years, 11 months ago
0Thank You