ECO101H1 Lecture Notes - Opportunity Cost
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ECO101H1 Full Course Notes
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Opportunity cost of an action is what are forgoes (gives up) by not taking the best alternative action. Insights (1) the question should i do x? should be replaced by should i do x or. Y where y is the most highly valued alternative to x? (2) opportunity cost includes time lost as well as money cost. Basic examples: you go to concert, which costs . Your best alternative is to work for 2 hours and earn . *the opportunity cost of spending is (since you could have better choice) the benefit does not affect opportunity cost. , you could never attend the concert: you choose to go to a concert, which costs . Your best alternative is to go for a walk, you value at . Difficult examples: in 2005, you bought a bottle of wine for . In 2008, you could have sold it for . Today, you could sell the wine for .
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