CONCEPT OF OPPORTUNITY COST

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 Opportunity cost is the cost of choosing one option over another. It is the value of the next best alternative that is given up as a result of making a decision. For example, if you decide to spend your Saturday afternoon going to the movies, the opportunity cost of that decision is the value of the next best alternative, such as going for a hike or spending time with friends.

One common example of opportunity cost is the choice between going to college or not. The cost of attending college includes tuition, books, and other fees. However, the opportunity cost of going to college is the income that could be earned by working instead. If the income from a job is higher than the cost of attending college, then the opportunity cost of going to college is negative.

Another example of opportunity cost is the choice between investing in stocks or real estate. The cost of investing in stocks includes brokerage fees and the cost of the stocks themselves. The opportunity cost of investing in stocks is the potential return that could be earned by investing in real estate instead. If the potential return from real estate is higher than the cost of investing in stocks, then the opportunity cost of investing in stocks is negative.

In conclusion, opportunity cost is the value of the next best alternative that is given up as a result of making a decision. It is an important concept in economics and is applicable to many different situations. By understanding opportunity cost, individuals and businesses can make more informed decisions and weigh the potential costs and benefits of different options.

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