What are the cost of marginal opportunities?

The cost of the opportunity is an expression used to describe the fusion of two economic terms: occasional costs and marginal costs. The cost of the opportunity concerns a system of cost measurement with regard to what needs to be given up to achieve it. The marginal costs are additional costs associated with the decision to produce other units of the product. The cost of marginal opportunities is therefore a measurement of the cost of producing other units of goods. For example, the company can produce 10,000 pen units in eight hours a day. If the company managers decide to increase the production of the pen to 12,000 units per day, the costs can be calculated by the concept of the cost of marginal occasion. In this case, it will include overtime reflections that are paid to workers or, in addition, which must be added to move the work to meet the increase. It will also include the calculation of the costs of other materials needed to produce a pen.

In addition to business or economy, this measurement can also be used for personal decisions. For example, a young boy may have $ 50 in his pocket to take a week. Assuming that the boy has a desire for some ice cream and buys one for $ 5, it would reduce the income that must spend $ 45 for the rest of the week. If he decides to buy another ice cream cone for $ 5, it would further reduce his / her intake to $ 40. The cost of the first ice cream is $ 5, while the marginal opportunity for the second ice cream cone is $ 5.

Another way to illustrate this concept using the above example is to imagine that the boy can conveniently afford the first $ 5 (USD) on the ice cream, but had to sacrifice his bus fare for the second. In this case, the cost of the second ice cream is greater than the first costs for the first: the second ice cream not only cost him another $ 5 (USD), but it also cost him his ride home, which he had to think of walking.