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Opportunity Cost

Opportunity Cost:

Whenever you select a particular alternative, the next best alternative should be given up. For illustration, when you desire to watch cricket highlights in T.V., you should give up an additional hour study. The selection of watching cricket in T.V. outcomes in the loss of the next best option of an extra hour study rather. Therefore by watching T.V., you have forgone the chance of scoring an extra five or ten marks in exam.

Therefore the “opportunity cost” is the cost of somewhat in terms of an opportunity forgone (and the merits that could be acknowledged from that opportunity). In another words, the opportunity cost of an action is the value of subsequently best alternative forgone. The consideration of opportunity costs is one of the key differences among the notions of ‘economic cost’ and ‘accounting cost’. Choices are generally made on the basis of opportunity cost.

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