Opportunity cost is defined as the value or profit of something that must be forgone to acquire something else.

1. Opportunity Cost
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2. What is Opportunity Cost?
 Opportunity cost is defined as the value or profit
of something that must be forgone to acquire
something else.
 The concept was coined by Austrian economist
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Friedrich von Wieser in 1914.

3. Opportunity Cost in Production:
 Implicit Cost
Costs implied by the users to which a firm
allocates their owned resources
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 Explicit Coat
Direct monetary payment by producers

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Importance
 Allocating resources efficiently
 It allows for fixing the price of a factor
 It is important for determining the relative prices
of various goods
 Opportunity cost plays a crucial role in an
organization’s decision-making process

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