Benefits of Opportunity Cost

[Suba]

Opportunity cost can be defined as the benefit or gain lost as a result of having to choose one option from two or more. For example, if I have $10,000 and I have two options: first, building a business with an estimated 20% annual profit, and second, buying shares with an estimated 15% annual profit. But after various considerations, I ultimately choose to buy shares, the opportunity cost is 5%, meaning I have lost the opportunity to make a greater profit.

Here are some of the benefits of opportunity cost:
1. Determining the priority of choices
2. Knowing the risks of each decision
3. Maximizing potential opportunities/profits, etc.

 

[bluesky]

The problem is that all these ideas of investing money and earning profit from it are speculative in nature when you think and plan. So, you cannot say for sure whether you will win or lose.

 

[Kross]

Opportunity costs help us to critically examine the financial implications of the choices we make and how we allocate resources.

 

[Springtime]

If you can estimate the opportunity costs, it is easier to make a choice because you know the financial implications.