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Opportunity cost in Economics

Opportunity cost in Economics

Opportunity cost is the next best alternate forgone. (Opportunity cost definition)

I know that you guys are not here for the definition because all Economics books are flooded with this definition, so I am going to make it simple by this example:

Imagine you have \$20 in your pocket and you want to buy a burger and a sandwich, but you cannot buy both of them because the price of burger is \$16 and the price of the sandwich is \$9 which sums up to \$25.

You have \$20 in your pocket.

If you buy both burger and sandwich you will have to pay \$25

So, that means you will have to buy one of them as you do not have the money to buy both of them

Your resources are \$20 and wants are of \$25

What is opportunity cost?

As you have limited resources you are forced to make a choice because you cannot afford to buy both things.

If you decide to buy the burger:

The opportunity cost of burger is sandwich.

If you decide to buy the sandwich:

The opportunity of sandwich is burger.

Opportunity cost is the thing which you did not chose while you were making the choice. Another point which I would like to make is that opportunity cost is never mentioned in monetary price value.

You will never say that the opportunity cost of burger is \$9

You will never say that the opportunity cost of sandwich is \$16

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