Opportunity cost

click fraud protection

Opportunity cost - this is a theoretical figure.He points to how much one should reduce the production of goods to produce other unit of the like product by the seized funds.

Opportunity cost can be a constant and growing.In the former case, we say that the production factors act as a perfect substitute.They are used in the same proportions specified for the manufacture of both commodities.This doubling of the cost factors increase the production volume by half.Increasing the opportunity cost is considered to be able to produce a much greater volume of goods seized by the factors.This is achieved by reducing the volume of production of other goods.

Choice and opportunity cost are always together.Taking one thing, we have to give up something else.The meaning of the concept can be explained with an example.For example, a man offered two options.Each of them has its own value, each of them has some benefits.It is not necessary it will be financial gain.A person shall have the right of choice.It may take only one option.Theoretically, the best will be the most profitable.It should elect its man.In this case, the opportunity cost will be properly defined.Such problems people in his life decides to quite often.

Despite the fact that the concept of opportunity cost is considered to be economic, it is in some sense can be considered and a philosophical concept.At the same time it is used very widely in life, especially at the household level.This person is usually not particularly think about the selection, choosing what is more like, for example, refusing unattractive options.

order to alternative value has been determined correctly, you should understand the situation that confronts the need to accept or to refuse anything.It is important to be able to soberly assess the options available and set the right priorities.

to determine the opportunity cost of it is not necessary to resort to mathematical calculations.To a large extent, need to be able to think analytically.At the same time the value of one or the other variant may be determined in accordance with personal preferences.So, different people can determine the opportunity cost in different ways.

Facing the need to accept or reject one or the other option, do not immediately throw away seemingly unprofitable.It often happens that it is unsightly opportunities are the most valuable.

It should be noted that the increase in the number of options greatly complicates the choice.

Before you give something preference should evaluate the benefits of each of the proposed features.Often it comes to material gain.However, the value can also include intangible benefits.In general, it must have some value.It should be noted that it is often sufficient to determine the monetary value of one or another variant.In this connection, the choice is primarily recommended to determine the level of costs and to try to estimate the degree of income for all the alternatives.After the second figure is deducted first.Thus, a value of options, and the highest is the opportunity cost.

specified actions will be sufficient if the economic calculations.Often, however, with the material, and the options may include intangible benefits.In this case, and to take into account.