A-Z Popular Blog Decision Making Search »
Decision Making
Simplicable Guide
A-Z
Search
Popular
Sitemap
Advertisements
Related Guides

7 Examples of Opportunity Costs

 , December 22, 2016
An opportunity cost is the value of the best alternative to a decision. Decisions typically involve constraints such as time, resources, rules, social norms and physical realities. Doing one thing often means that you can't do something else. Opportunity cost is the practice of calculating or considering what you can't do as the result of each possible decision. The following are illustrative examples.

Risk vs Reward

An investor decides that the market is overvalued and goes completely to cash. This dramatically reduces their risk at the opportunity cost of the potential returns of being invested.

Education vs Work

A student considers the cost of a four year university education by calculating total tuition and expenses for the period. They may also include the opportunity cost of missing four years of salary in their calculations.

Product vs Product

A factory can produce 12,000 jars of peanut butter a day. The opportunity cost of every jar of smooth peanut butter is one jar of chunky peanut butter.

Service vs Service

A small airline has 28 aircraft. Their opportunity cost of offering a Tokyo to Hong Kong flight is the ability to offer a Tokyo to Taiwan flight.

Salary vs Quality of Life

An IT worker is offered a new job with a higher salary in a city with a lower quality of life. The opportunity cost of the higher salary is a lower quality of life such as reduced air quality.

Cost vs Quality

A manufacturer of headphones is facing stiff competition from low cost products with similar designs to their own. They decide to increase quality of their build to make the competition look and feel comparatively cheap. The opportunity cost of the new product design is increased cost and inability to compete on price.

Abilities vs Abilities

The opportunity cost of after school violin lessons at a particular school is the ability to join other after school activities such as baseball or the chess club.
Overview: Opportunity Cost
TypeDecision Making
Investing
Business Strategy
Management Accounting
DefinitionThe value of the best alternative to a decision.
Related ConceptsDecision Making
Investing
Business Strategy
Management Accounting
Quality of Life

Decision Making

This is the complete list of articles we have written about decision making.
A/B Testing
Abilene Paradox
Abstract Concept
Analysis Paralysis
Analytic Reasoning
Assertions
Benefit Of Doubt
Boil The Frog
Choice Architecture
Cold Logic
Collective Intelligence
Convergent Thinking
Counterfactual
Creativity
Critical Thinking
Decision Analysis
Decision Authority
Decision Balance
Decision Costs
Decision Fatigue
Decision Framing
Decision Mapping
Decision Quality
Decision Rationale
Decision Theory
Decision Tree
Devil's Advocate
Disagree And Commit
Divergent Thinking
Emotional Intelligence
Failure Of Imagination
Fallacies
Generalization
Group Decisions
Groupthink
Heuristics
Ideation
Imagination
Inaction
Indecision
Introspection
Intuition
Keep It Simple
Logic
Maximax Criterion
Minimax Criterion
Non Decision
Normative Model
Objectivity
Opportunity Cost
Overthinking
Paradox Of Choice
Pareto Analysis
Predictive Analytics
Preserving Ambiguity
Prioritization
Reverse Brainstorming
Sanity Check
Strategic Dominance
Thought Experiment
Tradeoffs
Visual Analytics
Visual Thinking
More ...
If you enjoyed this page, please consider bookmarking Simplicable.
 

Decision Making

A list of decision making techniques.

Abilene Paradox

The observation that groups may make collective decisions that are viewed as wrong or irrational by each individual member of the group.

Decision Making Process

A complete guide to the decision making process.

Rational Thought

Rational thought is often somewhat logical but includes factors such as emotion, imagination, culture, language and social conventions.

Uncertainty

The common types of uncertainty in decision making and strategy.

Information Costs

A definition of information costs with examples.

Reverse Brainstorming

A definition of reverse brainstorming with examples.

Decision Fatigue

The definition of decision fatigue with examples.

Devils Advocate

Taking a position that you do not necessarily agree with for the purposes of argument.

Paradox Of Choice

The definition of paradox of choice with examples.

Thought Processes

A list of thinking approaches and types.

Logic

A few logic terms explained.

Cognitive Biases

A list of common cognitive biases explained.

Abstract Ideas

A few dangers of being too abstract.

Objective vs Subjective

The difference between objective and subjective.

Intellectual Diversity

A definition of intellectual diversity with examples.

Creative Value

The definition of creative value with examples.

Anecdotal Evidence

The definition of anecdotal evidence with examples.

Benefit Of Doubt

The definition of benefit of doubt with examples.

Pessimism

The definition of pessimism with examples.
The most popular articles on Simplicable in the past day.

New Articles

Recent posts or updates on Simplicable.
Site Map