Opportunity cost

177nodes365rels

100%

Community · Opportunity cost

Summary

In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives.

32 words

SourcesWikipedia

Connections11

coined the term opportunity cost
The Austrian economist Friedrich von Wieser is credited with formally introducing the concept of 'opportunity cost' (Grenzkosten) into economic theory in his 1914 work.
SourcesWikipedia Wikidata Wikipedia Wikidata
graphical representation of opportunity cost
The PPF curve illustrates the maximum possible output combinations of two goods, where the slope of the curve represents the opportunity cost of producing one good in terms of the other.
SourcesWikipedia Wikidata Wikipedia Wikidata
application of opportunity cost in international trade
The theory of comparative advantage posits that agents should specialize in producing goods where they have the lowest opportunity cost, driving international trade efficiency.
SourcesWikipedia Wikidata Wikipedia Wikidata
distinction from opportunity cost
Unlike opportunity cost, which is forward-looking and considers future alternatives, sunk costs are past expenditures that should not influence rational future decisions.
SourcesWikipedia Wikidata Wikipedia Wikidata
fundamental condition for the existence of opportunity cost
Opportunity cost only arises because resources are limited; if resources were infinite, every choice could be satisfied without forgoing any alternative.
SourcesWikipedia Wikidata Wikipedia Wikidata
prominent school of thought utilizing opportunity cost
The Austrian school emphasizes subjective value and the role of individual choice, making opportunity cost a central pillar of their economic analysis.
SourcesWikipedia Wikidata Wikipedia Wikidata
foundational theory for opportunity cost
Marginalism provides the analytical tools to evaluate the cost of the 'next' unit of choice, which is essential for calculating opportunity costs.
SourcesWikipedia Wikidata Wikipedia Wikidata
component of opportunity cost
Implicit costs are the non-monetary opportunity costs of using resources already owned by a firm, such as the forgone salary of an entrepreneur.
SourcesWikipedia Wikidata Wikipedia Wikidata
theoretical framework for opportunity cost analysis
Rational choice theory assumes that individuals make decisions by weighing the benefits and opportunity costs of all available options to maximize utility.
SourcesWikipedia Wikidata Wikipedia Wikidata
pioneer of the subjective value theory
Menger's work on subjective value laid the groundwork for understanding that costs are not objective, but rather based on the value of the best forgone alternative.
SourcesWikipedia Wikidata Wikipedia Wikidata
applied opportunity cost to human action
Mises integrated opportunity cost into his broader theory of praxeology, arguing that all human action involves choosing between ends and sacrificing alternatives.
SourcesWikipedia Wikidata Wikipedia Wikidata

Facts