Economic Term Opportunity Cost

Economic Term Opportunity Cost-79
So I'm really going from scenario E to scenario D. But if I want 1 more rabbit, the production possibilities frontier drops off, and I will have to give up 40 fruit. As we'll see, it's going to change depending on what scenario we are in, at least for this example.So the opportunity cost of 1 more rabbit is 40 berries, assuming we are in scenario E. And another term when we talk about the opportunity cost of going after-- after producing I guess you could say-- the operating cost of producing 1 more rabbit here, when we talk about the opportunity cost of producing 1 more unit, that's sometimes called the marginal cost.But let's make sure we understand opportunity cost.

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If you're behind a web filter, please make sure that the domains *.and *.are unblocked. And so we want to think about what are the trade-offs if we try to catch more rabbits? If I try to get 1 more rabbit, I can't go into this impossible, this unattainable part right over here.

If you're in scenario B and if you want an extra rabbit, how much is that going to cost you in terms of berries?

Or if you want more berries, what's that going to cost you in terms of rabbits?

But what's the opportunity cost-- let's say, we're tired of eating meat.

We're sitting in scenario E, and we want to become vegetarians altogether.If you choose one alternative over another, then the cost of choosing that alternative becomes your opportunity cost.If you choose not to go to work today, for example, your opportunity cost becomes your lost wages.So this right over here, you can also view it as the marginal cost.In the context of this video, our costs are in terms of the thing that I'm giving up, the opportunity that I'm giving up.When referring to opportunity costs, investors often see it as the benefit you would have received by taking an alternative financial action.The difference in return between a chosen investment and your forgone alternative is essentially your opportunity cost.And when I phrase it this way, it is being phrased as a marginal cost.Now for those of you who want to get a little technical, this is a curve right over here. Well, I don't want to get too technical for the sake of this one right over here, this is a safe way to think about it.So over here, what we're doing is we're saying, OK, I want to increase my berries by 20, but to do that, I have to decrease my rabbits by 1.So the opportunity cost-- assuming we are in scenario E-- the opportunity cost of 20 more berries is 1 rabbit.


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