What Is Opportunity Cost?
Opportunity cost is the value of the next-best option given up.
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In this lesson you learn to
- Define opportunity cost as the value of the next-best option given up
- Work out the opportunity cost of a choice from a simple example
- Recognise that time and chances count, not just money
Check yourself: sample questions
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1.What is opportunity cost?
Opportunity cost is the value of the next-best option given up.
2.True or false: opportunity cost adds up every option you skipped.
Only the next-best option you give up counts.
3.In Bastiat's broken window story, the repair costs six francs. What is the unseen cost?
The six francs could have bought shoes or a book; that unseen option is the opportunity cost.
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Sources (5)
- Federal Reserve Bank of St. Louis, Open Vault: Real-Life Examples of Opportunity Cost (Doreen Fagan, Zitat Andrea Caceres-Santamaria)
- Frederic Bastiat: What Is Seen and What Is Not Seen, Abschnitt 'The Broken Window' (Econlib, Ausgabe FEE 1995, Uebers. Seymour Cain)
- OpenStax: Principles of Economics 3e (Greenlaw, Shapiro, MacDonald, 2022), Kap. 2.2 The Production Possibilities Frontier and Social Choices
- OpenStax: Principles of Economics 3e, Kap. 2.1 How Individuals Make Choices Based on Their Budget Constraint
- Eigene Berechnung (synthetische Rechenbeispiele)
Education only. Not financial advice.