Comments on: Opportunity Cost

By: cherta

cherta — Sun, 23 Mar 2008 03:06:46 +0000

Here is a good explanation you gave, Andy, but I’d like to give my own. The opportunity cost of any resource (product, service etc.) actually equals the cost (the value) of it in its best usage. It’s very significant in distinguishing accounting and economic profit. The last one is significant for making managerial decisions about where to invest your money, your efforts. It’s also logically close to methods of project analysis, especially to the method, called DCF (discounted cash flows). It takes into account “invisible” benefits from the alternative ways of investing your money, resources. Those alternative benefits turn to costs for your business, because you refuse them for benefit of the only one you’ve chosen. Why did I add “in its best usage”? Well, let’s take again your example with going to school. You assumed that instead of going to school you would be able to earn $30000. I’d like to add to this case, that you would be able to earn $30000, working as a bartender in “Praha”, $25000, working as an accountant assistant and $20000, being a part-time worker in “McDonalds”. In this new situation the opportunity cost remains $30000, because you get the highest price for your labor resource and, thus, the position of the bartender is the best usage for your workforce.

By: samson

samson — Tue, 25 Mar 2008 07:59:28 +0000

this is a very good question. A couple of days ago , i think about it carefully. Sometimes we must put our eyes in the future and what great chances we will meet after school , we don not know now. maybe good ,maybe bad.

By: Adriano

Adriano — Thu, 17 Apr 2008 01:45:50 +0000

This is cool. whe use this kind of therms in finacil life. the cost oportunity is always relative. Because we, i dont know if is used this expression in english but, we have to open hand of doing something we want to do another thing that is important for us too!

Nice subject Andrew!!

By: Adriano

Adriano — Thu, 17 Apr 2008 01:46:19 +0000

This is cool. whe use this kind of therms in finacil life. the Opportunity Cost is always relative. Because we, i dont know if is used this expression in english but, we have to open hand of doing something we want to do another thing that is important for us too!

Nice subject Andrew!!

By: josefe-

josefe- — Mon, 16 Jun 2008 19:23:03 +0000

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