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What is Opportunity Cost

Opportunity Cost

“What exactly is Opportunity Cost?”

Opportunity cost is the value of what you lose when you pick one option above the rest.

So it is the loss of the alternatives when you settle on a singular choice,

Life Application/Analogy

Think of it as buying a $7 coffee

When you settle on buying that coffee you will lose out on the other possible drink options. You lose out on maybe buying a $7 smoothie, or two $3.50 cookies, or saving that money for a large purchase. It is everything you lose when you settle on that option.

How do I remember it?

In my head I think of the name directly. “Opportunity cost, okay it is what opportunities are costed when you choose one.”

I say costed because it allows me to better remember the term. It reminds me that Opportunity Cost is about the alternative values.

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