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Opportunity cost is the value of afactor in itd next best alternative?
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Opportunity cost is the value of afactor in itd next best alternative?
Opportunity cost is the cost which is not actually incurred, but would have been incurred in the absence of employment of self-owned factors. As expenditure is not currently incurred, this cost is often ignored and not recorded in the books of accounts.
However, management should never ignore it while taking business decisions. In the words of Joel Dean, “In business problems, the massage of opportunity costs is that it is dangerous to confine cost knowledge to what the firm is doing. What the firm is not doing is frequently the critical cost consideration, which it is perilous but easy to ignore.”
The concept of opportunity cost was popularised by the American writers. It occupies a very important place in modern economic analysis. Opportunity cost of any input is the next best alternative use that is sacrificed by its present use.
It is measured by the value of factors of production used in producing a good, when put to the next best alternative use. In other words, it indicates what a factor could earn in the next best use. Opportunity cost reflects the benefits we give up to select the-most preferred choice.
For example, Meetu sacrifices lunch and takes his girlfriend Charu to the cinema. In this case, the opportunity cost of the cinema is the lunch he did not have.”Similarly, if a farmer decides to grow wheat instead of rice, the opportunity cost of the wheat would be the rice, which he might have grown rather.
Thus, opportunity cost is the cost of foregone alternative. If we produce more of one thing, resources have to be withdrawn from other uses, as these are scarce. In the words of Lipsey, “The opportunity cost of using any factor is what is currently foregone by using it”. Opportunity cost is also the opportunity lost or sacrificed. To quote Watson, “Cost of anything is the value of the alternative or the opportunity that is sacrificed”.
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Opportunity cost is the value of afactor in itd next best alternative?
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Opportunity cost is the value of afactor in itd next best alternative? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Opportunity cost is the value of afactor in itd next best alternative? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Opportunity cost is the value of afactor in itd next best alternative?.
Opportunity cost is the value of afactor in itd next best alternative? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Opportunity cost is the value of afactor in itd next best alternative? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Opportunity cost is the value of afactor in itd next best alternative?.
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