Overview
Opportunity cost is a fundamental concept in economics that helps individuals and businesses make informed decisions by considering the value of the next best alternative. It emphasizes the importance of trade-offs in a world of limited resources, guiding choices in personal finance, business invest...
Key Terms
Example: Water is scarce in drought conditions.
Example: Choosing to spend money on a new phone instead of saving for a vacation.
Example: A company allocating funds to marketing instead of research.
Example: Deciding whether to buy a car or use public transport.
Example: Evaluating whether to invest in a new product line.
Example: Choosing to study instead of going out with friends.
Related Topics
Cost-Benefit Analysis
A method for comparing the costs and benefits of a decision to determine its feasibility.
intermediateMarginal Utility
The additional satisfaction gained from consuming one more unit of a good or service.
intermediateSupply and Demand
The relationship between the availability of a product and the desire for that product.
intermediateKey Concepts
ScarcityTrade-offsDecision MakingResource Allocation