Concept of Opportunity cost

Opportunity cost:

The cost of sacrificing one opportunity is known as opportunity cost. 

                     Opportunity loss is opportunity cost

 

Example:

There is a one farmer who has a piece of land and he wants to cultivate on that land now he has two options. 

           He can cultivate Rice or wheat but if he   cultivates rice he is getting around ₹50,000 income while from wheat he is getting  around ₹60000 income. 

                             In the above example which will u select obviously you will go for wheat because you are getting more income from wheat than rice. 

                   

                        This is opportunity cost 

Cost of sacrificing one alternative of rice for the sake of another alternative wheat is known as opportunity cost. 

Example 2: Imagine that you need to send courier to another person who is in another state which takes 3 hours to reach the state. But you are earning ₹1000 per hour. 

     Now you have two options you can go directly and give him which you takes 3 hours time and ₹200 money I.e(for  petrol)  but if you send  by a courier boy he takes 500 rs 

In the above example your opportunity loss is ₹3000 I.e(per hour income your's ₹1000*3=₹3000)

                     This is opportunity cost

       cost of sacrificing one alternative sending through courier boy for the sake of another alternative which you loss ₹3000 is know as opportunity cost.