Opportunity cost is that cost which is measured in monetary or in real terms for things or activity which you might have done if you were not doing some other thing or activity. It is the most basic concept of economics, to understand it better given below are some of the examples of opportunity cost –
- If as a consumer you have $500 than with that money you can either buy a laptop or a 3d television now if you buy a laptop than your opportunity cost in economics would be 3d television.
- Another real life example would be suppose you have 5 hours to spare and in that 3 hours you can either go for a movie or at your friend’s house than if you decide to go to your friend’s house than your opportunity cost would be movie which you were not able to see.
- Corporate also have opportunity cost, now suppose a corporate has 100 million dollars now with that money he or she can either invest that money for future expansion of business or keep it in the bank as deposit for interest income. If the corporate decide for future expansion than opportunity cost will be interest which he or she might have earned if it had deposited that money into the bank.
- Government also has opportunity cost problem, example of it being when deciding the budget government has to decide how much to allocate education and health and how much to allocate it for war and security expense because any increase in war related expense would mean that government has less money for education and health related expense.