OPPORTUNITY COST OR REAL COST
Opportunity cost is the sacrifice made in making an economic decision, expressed in terms of the next best available alternative foregone. It is a central concept in economics, and if often regarded as the ‘true’ cost of an economic decision.Its otherwise known as alternative forgone,real cost and true cost.
Opportunity cost is defined as the alternative that has been forgone for instance if Mr Ola has to choose between buying a shirt and a pair of shoe the real or opportunity cost of a shirt is the pair of shoe he has to do with that. you can say the opportunity cost of any item is referred to as an alternative forgone in order to buy that Item while money cost is the actual amount of money spent on buying such item
BENEFITS OF OPPORTUNITY COST
- It helps individuals to allocate resourses
- It helps individuals to prioritise needs
- It helps firms in decision making on what,how and for whom to produce
- It's guides business firms in policy formulation and implementation
- It helps the government in preparation of budget
- It helps the government in allocation of resources
- It helps the government in decision making to help the economy
- It helps the government in project excecution.
- It helps individual in judicious use of scarce resourses.
- It shows that all individual activities involve sacrifice.