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# What is Opportunity Cost?

Opportunity cost is the value of the next best alternative that is overlooked. Simply put, it’s the cost of what else you could choose to do. Helping companies make higher selections via means of displaying possibilities misplaced because of making an investment in options inclusive of stocks, inventory markets, actual estate, land and services. Opportunity prices usually no longer seem in economic reports. It’s now no longer pretty much cash and financial prices. It is likewise associated with the misplaced time invested in some other place withinside the application offers. Simply put, it’s an idea of microeconomics that describes beyond achievements and capability possibilities.

## Definition of Opportunity Cost in Economics

In present-day monetary analysis, the issue of manufacturing is missing as compared to wants.

Therefore, whilst society makes use of a specific detail withinside the manufacturing of a specific commodity, it abandons different commodities which could use identical detail. This brought about the concept of ​​Opportunity Cost (OC).

Let’s say you want a few sorts of metal to make a weapon for war. Therefore, society needs to surrender the quantity of equipment that may be produced by the use of the identical quantity of metal.

## Opportunity price calculation method

Formula=Total Revenue-Economic Profit

Opportunity price example

Use the illustrations to apprehend those prices.

Let’s say a farmer has land wherein he can develop wheat and rice

Therefore, if he chooses to develop wheat, he cannot develop rice and vice versa.

Therefore, the likely price of rice is the wheat he abandoned. The following discern illustrates this.

Opportunity price graph –

Let’s say that a farmer can use this land to supply both 50 quintal rice (ON) and forty quintal wheat (OM). Now if he produces rice, he cannot produce wheat.

Therefore, the OC of fifty quintal rice (ON) is forty quintal wheat (OM).

In addition, farmers can pick out to supply any aggregate of the 2 plants alongside the curve MN (Productivity Curve). Suppose he chooses factor A, as proven above.

Therefore, he produces OD quantities of rice and OC quantities of wheat. After that, he determined to transport to factor B. Now he desires to lessen wheat manufacturing from OC to OE for you to grow rice manufacturing from OD to OF.

Therefore, the OC of the DF quantity of rice is the CE quantity of wheat.