Question

Opportunity cost picture and explain it

Answer 1

Answer : when a person lost his second best choice under his budget level then this creates some cost to him and this cost is known as opportunity cost.

For example : Let the person has $15 to spend. Now the person have to decide on which thing he will spend. Let the person need a note book whose price is $15. On the other side, he wants to spend some of his budget on food which is his second best choice. But because of limited budget the person can not spend on both. In this situation the person decide wheather he will go. As note book is needed to him, it is his first choice and hence he will spend $15 on purchasing note book. Now the lost food consumption is cost to the person which is called opportunity cost.