Opportunity Cost - Economics Concepts, Business Economics & Finance Video Lecture | Business Economics & Finance - B Com

the basic economic problem is the issue
of scarcity because resources are scarce
but once are unlimited
people must make choices this lesson
showcases the most important concept in
macroeconomics which is the concept of
opportunity cost
very simply everyone has the same amount
of hours in a day but we all make
different decisions about what we do
what we choose to buy and how we spend
our time what determines these choices
opportunity cost does every time you
make a choice there's a certain value
you place on that choice you might not
know it or think about it but every
choice has a value to you and when you
choose one thing over another you're
saying to yourself I value this more
than another choice I had now the
opportunity cost of a choice is what you
gave up to get it if you have two
choices either an apple or an orange and
you choose the Apple then your
opportunity cost is the orange you could
have chosen but didn't you gave up the
opportunity to take the orange in order
to choose the Apple in this way
opportunity cost is the value of the
opportunity lost value has two parts to
it it has benefits as well as costs if
you choose an apple over an orange maybe
the Apple cost less but maybe you enjoy
it more so looking at choice in terms of
benefits and costs helps you make better
economic decisions to make a good
economic decision we want to choose the
option with the greatest benefit to us
but the lowest cost for example if we
graduate from college and suddenly we
find ourselves in the job market there
are choices to be made and let's say
that two jobs become available to us we
can either work for Company A or Company
B now the job with Company A
promises to pay us $20 an hour while
Company B offers to pay us only $10
based on this information alone of
course most people will choose Company A
why because they're paying a higher
salary but when you look at this kind of
a choice in only dollar terms then
you're only seeing it from the
perspective of the benefits now let's
take that same example but now we
discover that the job for Company A
requires a fancy dress suit that will
cost you fifteen hundred dollars you
realize that the job with the higher
salary may not be worth it to you now
you're starting to think economically
you're thinking economically when you
look at the value of a choice through
the eyes of the benefits and the costs
whatever we choose the opportunity cost
is the value of the choice we could have
had the opportunity cost of working for
company a is the value of what we gave