Opportunity Costs

In an ideal world, everybody would have whatever they wanted, but this isn’t always the case. Tradeoffs are often required, which means settling for alternatives, but what is the cost of that tradeoff? Opportunity costs-the value of the best alternative option not chosen-help calculate the cost of alternative options. It’s a concept often used by economists, investors or businesses but can be adapted in many other ways. Whether we realize it or not, we use some level of opportunity cost every day when deciding between two job opportunities, multiple investments, or places to live. Opportunity cost is important because it can impact profitability. It gives insight to the cost of each choice one is weighing and is a reminder that every choice results in losses and gains. Examples of Opportunity Costs Any decision being contemplated has an opportunity cost. There is always a chance that the other option could end up being more lucrative than the one you end up choosing. Let’s say a real estate business is making a decision about whether to acquire two new properties. The opportunity cost of not buying them