{"id":1139,"date":"2021-04-27T20:27:30","date_gmt":"2021-04-27T20:27:30","guid":{"rendered":"https:\/\/enorcerna.com\/wiki\/what-is\/opportunity-cost\/"},"modified":"2021-04-27T20:27:30","modified_gmt":"2021-04-27T20:27:30","slug":"opportunity-cost","status":"publish","type":"post","link":"https:\/\/enorcerna.com\/wiki\/what-is\/opportunity-cost\/","title":{"rendered":"Opportunity cost"},"content":{"rendered":"
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What is the opportunity cost?<\/h2>\n

The opportunity cost is and<\/strong>The alternative cost that is waived when a particular decision is made. <\/strong>This includes the benefits that could have been obtained if the other option had been chosen.<\/p>\n

In other words, the opportunity cost comprises those resources that a person gives up when making a choice or making a decision<\/strong>.<\/p>\n

This concept is also known as the value of the best option not selected.<\/strong><\/p>\n

Opportunity cost types<\/h2>\n

The opportunity cost can be increasing or constant. <\/strong><\/p>\n

Growing<\/h3>\n

Also called law of increasing opportunity cost, <\/strong>this type of cost shows how such as some extra units of a certain product are made, their opportunity cost will be in relation to said production.<\/strong><\/p>\n

Understanding this concept helps companies decide whether increasing production is a good choice or not. In this way, it will be easier to achieve an action plan that provides fewer losses and more benefits.<\/p>\n

Constant<\/h3>\n

This type of cost refers to the costs that are related to the production of a certain service or product that remain stable, allowing production levels to be higher.<\/p>\n

In this mode, the relationship between costs and the number of products will be <\/strong>forever <\/strong>the same. <\/strong><\/p>\n

Steps to calculate opportunity cost<\/h2>\n

To calculate the opportunity cost, the following steps must be performed:<\/p>\n

\"Steps<\/p>\n

    \n
  • Identify the alternatives available<\/strong>: be aware of all the options and alternatives that allow you to obtain certain benefits.<\/li>\n
  • Calculate the expenses of each alternative<\/strong>: know how much each of the available options costs, that is, what will be the expenses, costs and resources that will be needed to start the project.<\/li>\n
  • Calculate return on investment: <\/strong>know what benefits each option and investment alternative will provide.<\/li>\n
  • Choose the most profitable option: <\/strong>the option that is most beneficial and most profitable should be chosen.<\/li>\n<\/ul>\n

    Opportunity cost examples<\/h2>\n

    Here are some examples to better understand this concept:<\/p>\n

    A person decides to invest his saved money. A certain bank proposes a fixed term that will have a 16% interest rate<\/strong>, but on the other hand, a private entity suggests that Invest in bonds that will earn you 13% interest. <\/strong><\/p>\n

    The person makes the decision to invest their savings in a fixed term, so that the opportunity cost will be 13%<\/strong> of earnings that the bonds would have provided him, which he ended up giving up when he chose the fixed term.<\/p>\n

    Likewise, a person has a house that they do not live in and that does not have taxes, they have two alternatives: rent it for $ 5000 per month or not rent it. The opportunity cost of not renting the house would be represented by $ 5000 per month. <\/strong><\/p>\n<\/div>\n\n\n

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    What is the opportunity cost? The opportunity cost is andThe alternative cost…<\/p>\n","protected":false},"author":1,"featured_media":1140,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-1139","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-what-is"],"_links":{"self":[{"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/posts\/1139","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/comments?post=1139"}],"version-history":[{"count":0,"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/posts\/1139\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/media\/1140"}],"wp:attachment":[{"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/media?parent=1139"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/categories?post=1139"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/tags?post=1139"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}