What is opportunity cost?

What Does opportunity cost Mean

The opportunity cost , alternative cost or opportunity cost is an economic concept that allows naming the value of the best option that is not concrete or the cost of an investment made with own resources and makes other possible investments are not materializing .

It could be said that the opportunity cost is linked to what an economic agent gives up when choosing something . The opportunity cost is also the cost of an investment that is not made (calculated, for example, from the expected profit based on the resources invested).
The value of the best unrealized option is as other professionals also know about the aforementioned opportunity cost that we have to underline that it was found at the beginning of the 20th century about its origin of appearance as a concept. And it was at that time, more specifically in 1914, when the economist Friedrich von Wieser invented and made it known.

Specifically, he made the "official presentation" of the term through one of his most important publications entitled "Theory of the social economy." A work with which it came to consolidate its weight in history, and specifically in the financial and economic one, because through it not only did it establish the concept that we are addressing but it also made it possible to pay special attention to issues such as scarce resource allocation or marginal utility.
For an investment to be financially logical, its return must be at least the same as the opportunity cost. Otherwise, it would be more what is lost by disposal than what is gained by the investment made.
The opportunity cost can also be estimated from the profitability that an investment would provide and taking into account the accepted risk . This type of calculations allows us to contrast the existing risk in the various investments that can be made.
The macroeconomics stresses that the opportunity cost can only be determined from factors that are external to the investment.
Opportunity cost example : a man is about to invest his savings. A bank offers you an interest rate of 15% for a fixed term, while another entity proposes that you invest in bonds that provide an interest of 12%. The person decides to invest his money in a fixed term; the opportunity cost, therefore, will be 12% of the profits that the bonds would have given you.
We are basically approaching this concept from an economic point of view, but it is important that we recognize that our lives are also marked by opportunity cost on a personal level. Thus, any decision we make in our most private sphere will assume that it is influenced and determined by it.
An example would be that the weekend arrives and they propose two different plans for the same day and the same time, such as a night out with friends or a romantic dinner with a couple. In this case, given this situation, what we will do is choose the proposal that minimizes our opportunity cost.

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