Talk:Principles of Economics/Opportunity Cost

This is the content from Microeconomics/Opportunity Cost, which should be deleted after merged with this page.

Formally, opportunity cost is the cost of the next best forgone alternative. That is, it is the cost that one incurs by taking a specific decision rather than some other. For example, assume that I have $5.00 with me, and I have two choices how to spend that money: buy a movie ticket or eat lunch. If I choose to buy a movie ticket, then the forgone alternative was buying lunch with that same money. This is just a small example of opportunity cost using money. However, there are more interesting examples. Opportunity cost is a result of scarcity. Any limited resource will incur an opportunity cost. In the previous example, the scarce resource is money; there is a finite amount available to me, and I can do only one thing with it. Opportunity cost is important in topics such as life insurance, which provides a hedge against the opportunity cost (in terms of income that will never be earned) of someone's death. Opportunity cost is also the 'unseen' or intangible cost incurred by a person when undertaking an endeavor. For example, time that could be used working and earning money could be the opportunity cost to someone who is a full-time student. The limited resource here is the student's time, which is "spent" in study rather than in earning income. A final example is the case of a family business. If a family member works in the business without a salary, there are two opportunity costs involved. The opportunity cost to the business is the wage that it would have paid another non-family employee. Alternatively, the opportunity cost to the family member is the wage she would have recieved if she were working elsewhere.

DettoAltrimenti 01:52, 28 July 2006 (UTC)