What is the opportunity cost of choosing good 1 over good 2?
Understand the Problem
The question is asking for the definition of opportunity cost in the context of choosing between two goods. It is specifically looking for what is forfeited when selecting good 1 over good 2.
Answer
The value of good 2 foregone when selecting good 1.
The opportunity cost of choosing good 1 over good 2 is the value of good 2 that you forego when selecting good 1.
Answer for screen readers
The opportunity cost of choosing good 1 over good 2 is the value of good 2 that you forego when selecting good 1.
More Information
Opportunity cost is a crucial concept in economics, highlighting the cost of missing out on the next best alternative when making a decision.
Tips
A common mistake is overlooking non-monetary factors that can constitute opportunity costs, such as time or satisfaction.
Sources
- Opportunity Cost: Definition, Formula, and Examples - Investopedia - investopedia.com
- Opportunity Cost - Econlib - econlib.org
- Real-Life Examples of Opportunity Cost | St. Louis Fed - stlouisfed.org
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