Question

Explain about opportunity cost...
Write in your own words in about 50-60 words, paragraph wise...

Answer 1

The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land, labor, capital, etc. In other words, the opportunity cost is the opportunity lost due to limited resources.

Every firm or individual has limited resources, having alternative uses with varied returns. Therefore, the resource owners employ their scarce resources in the most productive use with an objective to maximize their incomes and thus, the income expected from the second best use of the resources is foregone. The opportunity cost is also called as the Alternative Cost.