Question

When most people want to know the cost of an item or a service, they look for a price tag. When economists want to determine cost, they go one step further. They use the idea of opportunity cost. Explain the concept of opportunity cost and illustrate with an example of your own (not from the book).

Answer 1

Answer:

Oppotunity cost is the value of the foregone items.

Explanation:

Opportunity cost refers to the worth of the next best alternative that you give up everytime you make a decision. It is a loss incurred by choosing one option over the other.

For example, if you walk to a shop and buy a new phone. The money spent on purchasing the phone cannot buy anything else. If the next best alternative to the phone was a watch, then the opportunity cost of the phone is the value of the foregone watch.