What do you mean by trade-off and opportunity cost explain with example?
Whenever you make a trade-off, the thing that you do not choose is your opportunity cost. To butcher the poet Robert Frost, opportunity cost is the path not taken (and that makes all the difference). You bought that bike? Then the snowboard was your opportunity cost.
What is opportunity cost and trade cost?
Key Takeaways. Opportunity cost is the forgone benefit that would have been derived from an option not chosen. To properly evaluate opportunity costs, the costs and benefits of every option available must be considered and weighed against the others.
What is the opportunity cost of any trade-off?
These two concepts are concerned with the scarcity and the choice. Trade-off is sacrificing a certain option to choose another opportunity whereas opportunity cost is the cost that has to incur as a result of selecting the so-called opportunity. Thus, the opportunity cost is always the result of tradeoff.
What is trade-off in economics?
The term “trade-off” is employed in economics to refer to the fact that budgeting inevitably involves sacrificing some of X to get more of Y. With a fixed amount of savings, one can buy a car or take an expensive vacation, but not both. The car can be “traded off” for the vacation or vice versa.
What is trade-off explain with example?
The definition of trade off is an exchange where you give up one thing in order to get something else that you also desire. An example of a trade off is when you have to put up with a half hour commute in order to make more money.
What is opportunity cost and example?
The opportunity cost is time spent studying and that money to spend on something else. A farmer chooses to plant wheat; the opportunity cost is planting a different crop, or an alternate use of the resources (land and farm equipment). A commuter takes the train to work instead of driving.
What is the meaning of opportunity costs?
“Opportunity cost is the value of the next-best alternative when a decision is made; it’s what is given up,” explains Andrea Caceres-Santamaria, senior economic education specialist at the St. Louis Fed, in a recent Page One Economics: Money and Missed Opportunities.
What is trade-off and example?
In economics, a trade-off is defined as an “opportunity cost.” For example, you might take a day off work to go to a concert, gaining the opportunity of seeing your favorite band, while losing a day’s wages as the cost for that opportunity.
What is the definition of opportunity cost in economics?
In microeconomic theory, the opportunity cost of a particular activity option is the loss of value or benefit that would be incurred (the cost) by engaging in that activity, relative to engaging in an alternative activity offering a higher return in value or benefit.
How do you explain opportunity cost?
Opportunity cost is the profit lost when one alternative is selected over another. The concept is useful simply as a reminder to examine all reasonable alternatives before making a decision. For example, you have $1,000,000 and choose to invest it in a product line that will generate a return of 5%.
What is the difference between a tradeoff and opportunity cost quizlet?
The difference between trade offs and opportunity cost is that a trade-off is all the resources that are lost when a consumer makes a choice. An opportunity cost is the most desirable opportunity given up when a consumer makes a choice. You just studied 8 terms!