What Is Opportunity Cost With Example

What Is Opportunity Cost With Example

The opportunity cost of a particular choice is the satisfaction that would have been derived from the next best alternative foregone; in other words, it is what must be given up or sacrificed in making a certain choice or decision. Example: Let’s take the decision to buy the book or not, if you will not buy the book then you will be involved in many other activities. In the following table, opportunity Cost of buying the book and not giving charity = 20 SU, which is the benefit derived from giving charity. You will buy the book if the benefit from other alternatives is less than the benefit derived from buying of book.

                                                 Cost Benefit Derived in

                    Cost                 Satisfaction Unit

Book          200                         10

Clothes      200                            5

Charity      200                         20

opportunity cost