Opportunity Cost
Opportunity cost is an economic concept that refers to the cost of an alternative that must be forgone in order to pursue a certain action. It is the cost of the next best alternative that is given up when a decision is made. Opportunity cost is the cost of the most desirable alternative that is not chosen. It is the difference between the benefit of the chosen option and the benefit of the forgone option.
Opportunity cost is an important concept in economics and decision-making. It is used to compare the cost of different options and to determine the most cost-effective choice. Opportunity cost is also used to measure the efficiency of an action or decision. It is the cost of the best alternative that is not chosen.
History of Opportunity Cost
The concept of opportunity cost was first introduced by the Austrian economist Friedrich von Wieser in the late 19th century. Wieser argued that the cost of an action is not just the monetary cost, but also the cost of the next best alternative that is not chosen. This concept was later developed by the American economist Frank Knight, who argued that the cost of an action is the value of the best alternative that is not chosen.
Opportunity cost has become an important concept in economics and decision-making. It is used to compare the cost of different options and to determine the most cost-effective choice. It is also used to measure the efficiency of an action or decision.
Comparison Table
| Option | Cost |
|---|---|
| Option A | $100 |
| Option B | $200 |
| Opportunity Cost | $100 |
Summary
Opportunity cost is an economic concept that refers to the cost of an alternative that must be forgone in order to pursue a certain action. It is the cost of the next best alternative that is given up when a decision is made. Opportunity cost is an important concept in economics and decision-making, and is used to compare the cost of different options and to determine the most cost-effective choice. For more information on opportunity cost, visit websites such as Investopedia, The Balance, and Investing Answers.
See Also
- Marginal Cost
- Marginal Benefit
- Marginal Utility
- Marginal Revenue
- Marginal Rate of Substitution
- Marginal Rate of Technical Substitution
- Marginal Productivity
- Marginal Propensity to Consume
- Marginal Propensity to Save
- Marginal Revenue Product
