Posted by Anjali Kaur on Jun 10, 2020

What is Opportunity Cost?

Heard a common saying; ‘opportunity never knocks twice. So, let’s understand the meaning of opportunity cost, to make wiser decisions.

When we say, the opportunity it stands for a ‘chance’, and when we say cost it implies ‘expense’. So, it is the cost of the next or the second-best alternative that is forgone. For example; a person got three job offers;

  • T.C.S is offering a salary package of Rs 10,00,000
  • H.C.L is offering a salary package of Rs 9,50,000
  • Infosys is offering a salary package of Rs 9,00,000
    • So, if a person chooses a T.C.S job offer then the second-best salary package that a person is giving up is of H.C.L. Here, H.C.L is the opportunity cost of choosing T.C.S job offer.

Read more about the theory of consumer behavior.

Test Yourself

Alan had three job offers from two I.T. companies. One of the company named; Reliance is offering a salary package of Rs 14,00,000 and the other company named; Amazon is offering a salary package of Rs 18,00,000. If Alan at present is getting a salary package of Rs 20,00,000. So, what will be his opportunity cost?

Think and send your answer at Contact@LearnWithAnjali.com

Solution Credit: Amandeep Kaur from Humanities (Shishu Niketan Public School, Mohali)
Solution Credit: Vibha from Commerce (Shishu Niketan Public School, Mohali)

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